10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 2008

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                      To                     

Commission File Number 001-12075

BOLT TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)

Connecticut	06-0773922
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Four Duke Place, Norwalk, Connecticut	06854
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (203) 853-0700

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of Each Exchange on Which Registered
Common Stock, without par value	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ¨    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  ¨    NO  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  x
Non-accelerated filer  ¨  (Do not check if a smaller reporting company)	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

The aggregate market value of Common Stock, without par value, held by non-affiliates on December 31, 2007: $213,100,000

As of September 5, 2008 there were 8,636,093 shares of Common Stock, without par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for our 2008 Annual Meeting of Stockholders, which will be filed no later than 120 days after June 30, 2008, are incorporated herein by reference into Part III of this Form 10-K.

Note Regarding Forward-Looking Statements

Forward-looking statements in this Annual Report on Form 10-K, future filings by the Company with the Securities and Exchange Commission, the Company’s press releases and oral statements by authorized officers of the Company are intended to be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These include statements about anticipated financial performance, future revenues or earnings, business prospects, new products, anticipated energy industry activity, anticipated market performance, planned production and shipping of products, expected cash needs and similar matters. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation (i) the risk of technological change relating to the Company’s products and the risk of the Company’s inability to develop new competitive products in a timely manner, (ii) the risk of changes in demand for the Company’s products due to fluctuations in energy industry activity, (iii) the Company’s reliance on certain significant customers, (iv) risks associated with a significant amount of foreign sales, (v) the risk of fluctuations in future operating results and (vi) other risks detailed in this Annual Report on Form 10-K and the Company’s other filings with the Securities and Exchange Commission. The Company believes that forward-looking statements made by it are based on reasonable expectations. However, no assurances can be given that actual results will not differ materially from those contained in such forward-looking statements. The words “estimate,” “project,” “anticipate,” “expect,” “predict,” “believe” and similar expressions are intended to identify forward-looking statements.

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PART I

Preliminary Note: In this Annual Report on Form 10-K, we refer to Bolt Technology Corporation and its subsidiaries as “we,” “our,” “us,” “the registrant” or “the Company,” unless the context clearly indicates otherwise.

ITEM 1. Business

The Company, organized as a corporation in 1962, consists of three operating units that manufacture and sell oilfield services equipment (previously referred to as the “geophysical equipment” segment): Bolt Technology Corporation (“Bolt”), A-G Geophysical Products, Inc. (“A-G”) and Real Time Systems Inc. (“RTS”). Bolt develops, manufactures and sells marine seismic energy sources (air guns) and replacement parts; A-G develops, manufactures and sells underwater cables, connectors, hydrophones and seismic source monitoring systems; and RTS develops, manufactures and sells air gun controllers/synchronizers, data loggers and auxiliary equipment.

In May 2008, the Company sold substantially all of the assets of its wholly-owned subsidiary, Custom Products Corporation (“Custom”), for $5,250,000, subject to adjustments for certain liabilities. Custom, a developer, manufacturer and seller of miniature industrial clutches and brakes and seller of sub-fractional horsepower electrical motors, formerly constituted the Company’s “industrial products” segment. As a result of this sale, amounts related to Custom have been reported as discontinued operations in fiscal year 2008. All prior fiscal year information relating to Custom has been restated as discontinued operations, and all information reported or discussed in this Form 10-K reflects the treatment of Custom as discontinued operations. The Company now operates only in oilfield services.

The Company’s products are mostly used in offshore marine seismic surveys, and sales of the Company’s products are generally related to the level of worldwide oil and gas exploration and development activity, which is dependent, primarily, on oil and gas prices. The recent high price of oil, increased worldwide energy demand and the depletion of proven oil and natural gas reserves have contributed to an increased demand for marine seismic surveys.

The Company provides critical products to the marine seismic exploration industry. Marine seismic exploration typically involves sophisticated ocean-going vessels deployed by large, multi-national firms to acquire data about the geological formations under the ocean bed. The industry standard to acquire such data is to use an energy source to create acoustic waves that penetrate the ocean bed, capture the waves as they reflect back to the ocean surface, transmit data to the seismic vessel and then, using sophisticated computer models, create a picture of the structures under the ocean bed. The picture is interpreted by geoscientists to identify subsurface formations conducive to the retention of hydrocarbons. The Company’s products provide the energy source (marine air gun), underwater cables, connectors and hydrophones as well as the controller that monitors the performance of the energy source. The following discussion contains more information on the Company’s products.

Marine Air Guns

Energy sources, such as our air guns, used in seismic exploration create acoustic waves at frequencies that readily travel to great depths in the earth. As acoustic waves travel through the earth, portions are reflected by variations in the underlying rock layers and the reflected energy is received as signals by devices known as hydrophones. A shipboard unit containing electronic recording equipment converts the signals to digital form. By using computer programs with complex calculations to manipulate the processed seismic data, geoscientists can model and visualize the subsurface through the creation and analysis of spatial representations. The analysis of seismic and other geological data is an important factor in decisions to drill exploratory and development wells. Because of the significant expense associated with drilling oil and gas wells, decisions on whether or where to drill are critical to the overall process. A seismic exploration vessel may tow as many as 96 air guns along with multiple hydrophone streamers of up to approximately 6.2 miles in length. The air guns are fired simultaneously every 75 to 150 feet along the survey line.

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Improvements in drilling success rates through the use of advanced seismic survey techniques, particularly 3-D techniques, have substantially increased the demand for seismic data. As a result, 3-D surveys utilizing these advanced technologies have gained increasing acceptance in the oil and gas industry as an exploration risk management tool and in field development and reservoir management activities. The precise shot to shot repeatability of our marine air guns and their reliability of operation make them especially useful in 3-D surveys.

The Company sells two types of air guns: “long-life” marine air guns and Annular Port Air Guns (“APG gun”). The long-life marine air gun is made to maximize the period between routine air gun maintenance and to provide characteristics that are advantageous to geoscientists in designing 3-D surveys. The APG gun is designed to maximize operating efficiency and acoustic output through a configuration that permits the implementation of simplified multi-gun arrays. These arrays produce less towing drag and provide ease of deployment and shielding of fragile hoses and cables from the high pressure air blasts released by the air gun. The selling prices are approximately $13,000 and $31,000 for the long-life marine air gun and APG gun, respectively.

After-market revenue from the sale of air gun replacement parts is a significant source of the Company’s revenue.

Underwater Cables, Connectors and Hydrophones

The Company’s marine cables and connectors are injection molded of thermoplastic polyurethane designed for use with marine air gun firing lines, bulkhead connectors and other underwater connectors required in seismic vessel operations. The Company’s signature hydrophones and pressure transducers are designed for use with marine air guns in a high shock environment. The purpose of the hydrophone and pressure transducer is for “near field” measurements of the outgoing energy waveforms from air guns and pressure monitoring.

The Company’s cables and connectors, hydrophones and pressure transducers are used with marine air guns manufactured by the Company as well as air guns manufactured by others.

Marine Air Gun Controllers and Synchronizers

In July 2007, the Company acquired substantially all of the net assets of RTS. RTS develops, manufactures and sells controllers and synchronizers for marine seismic energy sources (air guns). RTS products are designed to control and synchronize up to 96 air guns in a single seismic exploration vessel. The results of operations of RTS have been included in our financial statements from July 1, 2007. See Note 2 to Consolidated Financial Statements for further information concerning the RTS acquisition.

The Company’s marine air gun controllers and synchronizers are used with marine air guns manufactured by the Company as well as air guns manufactured by others.

Long-Lived Assets

Long-lived assets consist of: property, plant and equipment; goodwill; other intangible assets and other non-current assets. All of the Company’s long-lived assets are located in the United States. As of June 30, 2008 and 2007, the Company’s long-lived assets totaled $16,342,000 and $10,957,000, respectively.

Foreign Sales

During fiscal years 2008, 2007 and 2006, approximately 80%, 78% and 78%, respectively, of the Company’s sales were from shipments to customers outside the United States or to foreign locations of United States customers. See Note 13 to the Consolidated Financial Statements for information regarding the geographic distribution of sales.

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Backlog

Because of the relatively short period (generally less than 60 days) between order and shipment dates for our products, the dollar amount of current backlog is not considered to be a reliable indicator of future sales.

Competition

Our marine air guns compete primarily with marine air guns manufactured by ION Geophysical Corporation and Sercel Inc., a subsidiary of Compagnie Generale de Geophysique-Veritas. The Company’s principal competitor for connectors and cables is ION Geophysical Corporation, and the principal competitor for air gun controllers and synchronizers is Seamap, a division of Mitcham Industries, Inc. We believe that technology, product reliability and durability are the primary bases of competition in the market for our products and that the remaining competitive factors in the industry are field product support and price. The Company also believes that it can compete effectively with respect to each of these factors, although there can be no assurance that the sales of our products will not be adversely affected if current competitors or others introduce equipment with better performance or product support or lower price.

Marketing

The Company’s principal customers are worldwide marine seismic exploration contractors, who operate seismic vessels for collection of seismic data in accordance with their customers’ specifications or for their own seismic data libraries, and foreign national oil and gas companies.

Marketing of our products is principally performed by salaried sales personnel, all of whom are based in the United States. We also use sales agents for individual sales in certain foreign countries. In general, we market our products and services through our sales force, together with our technical services and engineering staffs, primarily to representatives of major geophysical contractors. The principal marketing techniques used are direct sales visits to current and potential customers, product demonstrations and participation at industry trade shows and meetings.

In general, products are sold on standard 30-day credit terms. In certain instances, we require our customers to furnish letters of credit payable upon shipment or provide advance payments. In limited cases, the Company allows customers extended payment terms of up to 12 months. We consider these practices to be consistent with industry practice.

Research and Development

Our ability to compete successfully depends upon, among other things, the development of new products as well as the improvement of our existing products. During fiscal years 2008, 2007 and 2006, we spent $272,000, $270,000 and $289,000, respectively, to develop new products and to improve existing products.

Employees

As of June 30, 2008, we employed 132 people on a full-time basis, all of whom are employed in the United States. The Company is not a party to any collective bargaining agreement and has had no work stoppages. The Company believes that relations with employees are good.

Manufacturing and Raw Materials

The Company manufactures and assembles its products in Norwalk, Connecticut, Cypress, Texas and Fredericksburg, Texas. Our manufacturing and assembly operations consist of machining or molding the necessary components and assembling and testing the final product. We generally maintain adequate levels of

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inventory to enable us to satisfy customer requirements within a short period of time. The raw materials used in our products, sourced from multiple suppliers, are generally in adequate supply. The costs of certain raw materials, especially the high quality steel required for the Company’s air guns, have increased. The Company monitors its costs and may pass cost increases on to its customers, when necessary.

For some marine air gun orders, we occasionally supply auxiliary equipment such as compressors, winches or other equipment manufactured by others. We have not experienced any supply problems with respect to these auxiliary items. Because we manufacture based on customer orders, we do not generally maintain inventory of fully assembled finished products. We consider our practices to be consistent with industry standards.

Regulatory Matters

We believe that we are currently in compliance with the requirements of environmental and occupational health and safety laws and regulations. Compliance with such laws and regulations has not resulted in significant expense in the past, and we do not foresee the need for substantial expenditures to ensure compliance with such laws and regulations as they currently exist.

Intellectual Property

We seek to protect our intellectual property by means of patents, trademarks and other measures. We currently own 11 patents relating to the manufacture of our products, with expiration dates from 2010 to 2027. Most of these patents are United States patents. Patents have been of value in the growth of our business and may continue to be of value in the future. However, we believe that our business is not primarily dependent upon patent protection, and therefore the expiration of our patents would not have a material adverse effect on our business.

Major Customers

Historically, a significant portion of our sales has been attributable to a small number of customers. The table set forth below indicates the customers accounting for 10% or more of consolidated sales in fiscal 2008 and 2007.

	Fiscal 2008		Fiscal 2007
Compagnie Generale de Geophysique-Veritas	17	%	19	%
Schlumberger Limited	15	%	10	%
Petroleum Geo-Services	10	%	8	%
Wavefield Inseis	7	%	10	%
SeaBird Exploration	6	%	11	%

The loss of any of the above customers or a significant decrease in the amount of their purchases could have a material adverse effect on the Company.

Available Information

The Company maintains an internet website at the following address: www.bolt-technology.com. We make available, free of charge, through our website our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). These reports and amendments to such reports and our other SEC filings are also available on the website maintained by the SEC at www.sec.gov. Alternatively, you may read and copy any materials we file with the SEC at the SEC’s Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

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ITEM 1A. Risk Factors

An investment in our Common Stock involves various risks. Set forth below are the risks that we believe are material to our investors. When considering an investment in our Common Stock, you should consider carefully all of the risk factors described below, as well as other information included and incorporated by reference in this report. The risks described below could materially and adversely affect our business, financial condition and results of operations and the actual outcome of matters as to which forward-looking statements are made in this report. The risk factors described below are not the only ones we face. Our business, financial condition and results of operations may also be affected by additional factors that are not currently known to us or that we currently consider immaterial or that are not specific to us, such as general economic conditions.

You should refer to the explanation of the qualifications and limitations on forward-looking statements on page 1 of this report. All forward-looking statements made by us are qualified by the risk factors described below.

Industry Related Risks

Technological change in the seismic industry may require us to make substantial research and development expenditures and may render our technology obsolete.

The market for our products is characterized by changing technology and new product introductions. Our air gun technology may become obsolete due to the introduction of a superior technology. We may be required to invest substantial capital to develop and produce successfully and timely new and enhanced products to stay abreast of technological change. We have no assurance that we will receive an adequate rate of return on such investment. If we are unable to stay abreast of technological change, we will be unable to compete in the future. If we are not competitive, our business, our results of operations and financial condition will be materially and adversely affected.

Volatility of oil and natural gas prices, which is affected by factors outside of our control, affects demand for our products.

Sales of our products correlate highly with oil and natural gas price trends, which are typically cyclical. If oil and natural gas prices are high, as is currently the case, marine seismic activity increases. This increases demand for our products. If oil and natural gas prices are low, the level of marine seismic activity decreases. This decreases demand for our products. In extreme cases, when oil and natural gas prices are significantly lower, older seismic vessels may be decommissioned and our equipment on those ships may be removed and put into storage for future use. Under such a scenario, our revenues could further decrease while our customers deplete stored inventories prior to placing new orders. Accordingly, a decrease in oil and natural gas prices could decrease our customers’ activity and decrease demand for our products. Any decrease in demand for our products could have a material adverse effect on our results of operations and financial condition.

Oil and gas prices are typically cyclical and affected by many factors. These include:

• the level of worldwide oil and gas production and exploration activity

• worldwide economic conditions and their effect on worldwide demand for energy

• the policies of the Organization of Petroleum Exporting Countries

• the cost of producing oil and gas

• interest rates and the cost of capital

• technological advances affecting hydrocarbon consumption

• environmental regulation

• level of oil and gas inventories

• tax policies

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• weather-related factors that may disrupt oil and gas exploration

• policies of national governments

• war, civil disturbances and political instability.

We expect prices for oil and natural gas to continue to be volatile due to circumstances outside of our control and to continue to affect our customers’ level of activity and the demand for our products.

Company Specific Risks

Loss of any major customer or consolidation among major customers could materially and adversely impact our results of operations and financial condition.

We have a concentration of business with a small number of major customers who are independent contractors performing marine seismic surveys on behalf of major oil companies. Sales to these major customers are significant in relation to our consolidated revenues. In addition, a large percentage of our consolidated accounts receivable balance at the end of any accounting period is from these customers. The loss of any major customer could have a material and adverse impact on our results of operations and financial condition. This risk would increase if consolidation of oil service companies continues. Additional information relating to concentration of business with a small number of major customers is provided in Note 13 to the Consolidated Financial Statements and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

We derive a significant amount of our revenues from foreign sales, which pose additional risks, including economic, political and other uncertainties.

Our foreign sales are significant in relation to consolidated sales. In fiscal 2008, sales outside of the United States accounted for approximately 80% of our consolidated net sales. We believe that export sales will remain a significant percentage of our revenue. Our sales contracts are denominated in U.S. dollars. Fluctuations in foreign exchange rates could make it more difficult for our overseas customers to meet their U.S. dollar obligations. In addition, sales of our products to customers operating in foreign countries that experience political/economic instability or armed conflict could result in difficulties in delivering and installing complete energy source systems within those geographic areas and receiving payment from these customers. These factors could materially adversely affect our results of operations and financial condition. Refer to Note 13 to Consolidated Financial Statements for additional information relating to foreign sales.

We experience fluctuations in operating results.

Complete air gun systems sales, which typically are large dollar amounts, do not occur in every accounting period. In certain periods, several complete air gun system sales may be recorded, and none in other periods. This “uneven” sales pattern is due largely to our customers’ schedules for the anticipated completion date for building a new seismic vessel or the target date for outfitting a conventional vessel to do seismic work. Customer demand for air gun replacement parts, underwater electrical connectors and cables and air gun controllers is ongoing, but the demand level for these products varies based on oil and gas prices and trends. Accordingly, our results of operations can vary significantly from one fiscal quarter to another and from one fiscal year to another. This may cause volatility in the price of the Company’s Common Stock.

An impairment of goodwill could reduce our earnings and stockholders’ equity.

Our consolidated goodwill balance at June 30, 2008 accounts for 17% of consolidated assets at that date. Goodwill is recorded when the purchase price of a business exceeds the fair market value of the tangible and separately measurable intangible net assets of the business. Our goodwill balance relates exclusively to the acquisition of subsidiaries. Generally accepted accounting principles require us to test goodwill for impairment

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on an annual basis or when events or circumstances occur indicating that goodwill might be impaired. If we were to determine that any of our remaining balance of goodwill was impaired, we would record an immediate non-cash charge to earnings with a corresponding reduction in goodwill. Refer to Notes 1, 2 and 4 to the Consolidated Financial Statements for additional information relating to goodwill.

Weak sales demand or obsolescence of our inventory may require an increase to our inventory valuation reserve.

A significant source of our revenue arises from the sale of replacement parts required by customers who have previously purchased our products. As a result, we maintain a large quantity of parts on hand that may not be sold or used in final assemblies for a lengthy period of time. Management has established an inventory valuation reserve to recognize that certain inventory may become obsolete or supplies may be excessive. The inventory valuation reserve is a significant estimate made by management. The actual results may differ from this estimate, and the difference could be material. The inventory valuation reserve is adjusted at the close of each accounting period, based on management’s estimate of the valuation reserve required. This estimate is calculated on a consistent basis as determined by our inventory valuation policy. Increases to the inventory valuation reserve result in a charge to cost of sales, and decreases to the reserve result in a credit to cost of sales. The inventory valuation reserve is also decreased to reflect scrapped or disposed of items. Weak sales demand or obsolescence may require an increase to the inventory valuation reserve, and such an increase may have a material and adverse impact on our results of operations with a corresponding decrease to inventory. Refer to Notes 1 and 6 to the Consolidated Financial Statements for additional information relating to the inventory valuation reserve.

We may be unable to obtain broad intellectual property protection for our current and future products, which could result in loss of revenue and any competitive advantage we hold.

Certain of the proprietary technologies used in our products are not patent protected. We rely on a combination of patents, common laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary technologies. Our competitors may attempt to copy aspects of our products despite our efforts to protect our proprietary rights, or may design around the proprietary features of our products. Policing unauthorized use of our proprietary rights is difficult, and we are unable to determine the extent to which such use occurs. Also, the laws of certain foreign countries do not offer as much protection for proprietary rights as the laws of the United States. Further, obtaining, maintaining or defending intellectual property rights in many countries is costly. The costs of pursuing any intellectual property claim against a third party, whether in the United States or in a foreign country, could be significant.

From time to time third parties may claim that we have infringed upon their intellectual property rights. Any such claims, with or without merit, could be time consuming, result in costly litigation and possible injunctions, require product modifications, cause product shipment delays or require us to enter into royalty or licensing arrangements. Such claims could have a material adverse effect on our results of operations and financial condition.

The loss of any member of our senior management and other key employees may adversely affect our results of operations.

Our success depends heavily on the continued services of our senior management and other key employees. Our senior management consists of a small number of individuals relative to larger companies. These individuals, as well as other key employees, possess sales and marketing, engineering, manufacturing, financial and administrative skills that are critical to the operation of our business. We generally do not have employment or non-competition agreements with members of our senior management or other key employees, except for employment agreements with our Chief Executive Officer and each subsidiary president. There is no assurance that any of our senior management or other key personnel will continue in such capacity for any particular period

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of time. If we lose the services of one or more of our senior management or other key employees, our operations may be materially adversely affected. We maintain life insurance policies for certain key employees of our subsidiaries with the Company as beneficiary.

Provisions in our certificate of incorporation and bylaws could discourage a takeover attempt, which may reduce or eliminate the likelihood of a change of control transaction and, therefore, the ability of our stockholders to sell their shares for a premium.

Our certificate of incorporation and bylaws contain certain provisions that could have the effect of delaying or preventing a third party from obtaining control of our Company. These provisions may reduce or eliminate our stockholders’ ability to sell their shares of Common Stock at a premium. They include a classified board, regulation of the nomination and election of directors, limiting who may call special stockholder meetings and requiring the vote of the holders of 95% of all shares of our stock to authorize certain business combinations.

Because we have no plans to pay any dividends for the foreseeable future, investors must look solely to stock appreciation for a return on their investment in us.

We have not paid cash dividends on our Common Stock since 1985 and do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain any future earnings to support our operations and growth, including any possible acquisition(s). Any payment of cash dividends in the future will be dependent on the amount of funds legally available, our earnings, financial condition, capital requirements and other factors that our board of directors may deem relevant. Accordingly, investors must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our Common Stock.

The market price of our Common Stock may be volatile.

The market price of our Common Stock has experienced significant fluctuations and may continue to fluctuate significantly in the future. Many factors cause the market price of our Common Stock to fluctuate, including, but not limited to (i) the volume of trading in our Common Stock and (ii) sales of our Common Stock by large institutional investors and others. These market fluctuations may adversely affect the market price of our Common Stock.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

The following table sets forth certain information with respect to the Company’s principal properties, all of which are leased, except for the Cypress, Texas facility, which is owned.

Location	Nature of Property	Approximate Area (Sq. Feet)	Expiration Date of Lease
Norwalk, Connecticut	Manufacturing	21,600	2013
Norwalk, Connecticut	Administration/Engineering/Sales	6,600	2013
Houston, Texas	Sales Office	150	2009
Fredericksburg, Texas	Administration/Manufacturing	4,000	(1)
Cypress, Texas	Administration/Manufacturing	32,500	(2)

(1) The Fredericksburg, Texas lease is on a month-to-month basis. Refer to “Contractual Obligations” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for information relating to relocation to new leased premises in Fredericksburg, Texas.

(2) The Cypress, Texas facility is owned by the Company.

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The Company’s products are manufactured and assembled at the Norwalk, Connecticut, Cypress, Texas and Fredericksburg, Texas facilities. In the opinion of the Company’s management, the properties described above are in good condition and repair and are suitable and adequate for the Company’s purposes. The properties are currently fully utilized and, operating in conjunction with second shifts, overtime and strategic outsourcing, provide sufficient productive capacity.

ITEM 3. Legal Proceedings

The Company is not aware of any material pending litigation or proceedings to which it or any of its subsidiaries are a party or to which any of its properties are subject.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

Executive Officers of Bolt Technology Corporation

Set forth below is information with respect to the executive officers of the Company relating to age, as of September 12, 2008, and business experience. With the exception of Mr. Andrews, all of the positions have been held for at least five years.

Prior to joining the Company in September 2007, Mr. Andrews was employed for a total of 13 years by Pitney Bowes Inc., from 1989 to 1999 and from 2005 to 2007. Mr. Andrews served in various capacities within Pitney Bowes Inc., including serving as Director, Finance-Latin America and US Dealer Channels and Director of Compliance and Controls-Finance Shared Services. During 2004, Mr. Andrews was engaged as a consultant. From 1999 to 2003, Mr. Andrews served as a principal at a residential construction and development company.

Name	Age	Present Position
Raymond M. Soto	69	Chairman, President, Chief Executive Officer and Director
Joseph Espeso	66	Senior Vice President-Finance, Chief Financial Officer, Assistant Secretary and Director
Joseph Mayerick, Jr.	66	Senior Vice President-Marketing, Assistant Secretary and Director
William C. Andrews	48	Vice President-Administration and Compliance and Secretary

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

On November 20, 2007, the Company’s Board of Directors approved a 3-for-2 stock split. The additional shares resulting from the stock split were distributed on January 30, 2008 to shareholders of record on January 16, 2008. Share and per share amounts reflected throughout the Consolidated Financial Statements and notes thereto and elsewhere in this Annual Report on Form 10-K have been restated to reflect the stock split.

In January 2008, the Company’s Common Stock began trading on the NASDAQ Global Select Market under the symbol “BOLT”. Prior to the change, the Company’s Common Stock was listed on the American Stock Exchange under the symbol “BTJ.” The following table sets forth the high and low sales prices for our Common Stock for the quarters indicated:

Fiscal 2008	High		Low
First Quarter	$	39.57	$	20.67
Second Quarter		32.83		21.77
Third Quarter		28.93		14.67
Fourth Quarter		25.22		17.50
Fiscal 2007	High		Low
First Quarter	$	13.85	$	7.47
Second Quarter		15.90		7.33
Third Quarter		23.57		10.67
Fourth Quarter		30.83		20.70

The number of stockholders of record at August 29, 2008 was 190. We believe that the number of beneficial owners is substantially greater than the number of record holders, because a large portion of our Common Stock is held of record in broker “street names.”

We have not paid a dividend since 1985. We do not intend to pay cash dividends on our Common Stock in the foreseeable future. Any decision to pay cash dividends will depend upon our growth, profitability, financial condition and other factors that the Board of Directors may deem relevant.

The Company did not make any repurchases of the Company’s equity securities during fiscal 2008.

Equity Compensation Plan Information

The following table sets forth aggregate information for the Bolt Technology Corporation 2006 Amended and Restated Stock Option and Restricted Stock Plan (the “Plan”), which was approved by the Company’s stockholders and is the Company’s only equity compensation plan in effect as of June 30, 2008:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) (1)
Equity compensation plans approved by security holders	108,000	$	19.74	605,250
Equity compensation plans not approved by security holders	—		—	—
Total	108,000	$	19.74	605,250

(1) The Plan provides that of the 750,000 shares of Common Stock that may be used for grants of stock options and restricted stock awards, up to 225,000 shares of Common Stock may be used for restricted stock awards. During fiscal 2008, 36,750 shares of restricted stock were awarded at an average fair value of $18.67 at date of grant. As of June 30, 2008, 188,250 shares of Common Stock remained available for issuance of restricted stock awards under the Plan.

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Performance Graph

The following graph and table compare total stockholder return on our Common Stock for the five-year period ending June 30, 2008, with the Standard & Poor’s SmallCap Index and Value Line’s Oilfield Services Industry Index over the same period. This comparison assumes the investment of $100 on June 30, 2003. The information in the graph is being furnished pursuant to Securities and Exchange Commission rules, and the stockholder return set forth is not intended to forecast and is not necessarily indicative of possible future performance.

Comparison of Five-Year Cumulative Total Return

Bolt Technology Corporation, Standard & Poor’s SmallCap Index and Value Line’s

Oilfield Services Industry Index

(Performance Results Through 6/30/2008)

Assumes $100 invested at the close of trading on June 30, 2003 in Bolt Technology Corporation Common Stock, Standard & Poor’s SmallCap Index and Value Line’s Oilfield Services Industry Index.

	June 30,
	2003		2004		2005		2006		2007		2008
Bolt Technology Corporation	$	100.00	$	130.43	$	185.51	$	349.86	$	1,276.52	$	981.30
Standard & Poor’s SmallCap Index		100.00		134.10		150.73		170.13		195.62		165.14
Value Line’s Oilfield Services Industry Index		100.00		136.17		197.60		298.82		380.19		512.10

The information included under the caption “Performance Graph” shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly set forth by specific reference in such a filing.

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ITEM 6. Selected Financial Data

The following table has been derived from the Company’s audited financial statements and sets forth selected consolidated financial data with respect to the Company and its subsidiaries. This information should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying notes provided elsewhere in this Form 10-K. This information differs from amounts previously reported on Form 10-K filings for the years ended June 30, 2004 through June 30, 2007 as a result of restatements attributable to the sale of Custom Products Corporation (see Note 3 to Consolidated Financial Statements) and the 3-for-2 stock split to shareholders of record on January 16, 2008 (see Note 1 to Consolidated Financial Statements).

	For the Years Ended June 30,
	2008			2007			2006			2005			2004
(In thousands, except per share amounts)
Income Statement Data:
Sales	$	61,635		$	46,929		$	29,393		$	15,551		$	11,743
Costs and expenses:
Cost of sales		33,164			25,347			17,226			9,148			7,419
Research and development		272			270			289			271			208
Selling, general and administrative		8,228			6,766			5,254			4,276			3,356
Interest income		(191	)		(211	)		(135	)		(47	)		(15	)
		41,473			32,172			22,634			13,648			10,968
Income from continuing operations before income taxes		20,162			14,757			6,759			1,903			775
Provision for income taxes		6,453			4,758			2,352			640			270
Income from continuing operations		13,709			9,999			4,407			1,263			505
Discontinued operations, net of taxes		860			608			438			396			348
Net income	$	14,569		$	10,607		$	4,845		$	1,659		$	853
Per Share Data:
Earnings per share—basic
Income from continuing operations	$	1.60		$	1.19		$	0.54		$	0.15		$	0.06
Discontinued operations, net of taxes		0.10			0.07			0.05			0.05			0.05
Net income	$	1.70		$	1.26		$	0.59		$	0.20		$	0.11
Earnings per share—diluted
Income from continuing operations	$	1.60		$	1.17		$	0.52		$	0.15		$	0.06
Discontinued operations, net of taxes		0.10			0.07			0.05			0.05			0.04
Net income	$	1.70		$	1.24		$	0.57		$	0.20		$	0.10
Average number of common shares outstanding:
Basic		8,581			8,416			8,196			8,128			8,122
Diluted		8,587			8,524			8,446			8,300			8,233
Cash dividends		—			—			—			—			—
Financial data at June 30:
Working capital	$	39,175		$	26,932		$	15,055		$	10,450		$	9,330
Total assets		61,867			47,618			34,717			27,423			22,918
Long term debt		—			—			—			—			—
Stockholders’ equity		55,517			40,686			28,332			23,075			21,392

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis should be read together with the Consolidated Financial Statements and accompanying notes and other detailed information appearing elsewhere in this Form 10-K. This discussion includes forward-looking statements about the demand for our products and future results. Please refer to the “Note Regarding Forward-Looking Statements” section of this Form 10-K.

Overview

Sales of the Company’s products are generally related to the level of worldwide oil and gas exploration and development activity, which is dependent, primarily, on oil and gas prices. The recent high price of oil, increased worldwide energy demand and the depletion of proven oil and natural gas reserves have contributed to an increased demand for marine seismic surveys. As a result, the demand for the Company’s products is strong. The Company’s sales increased 31% in the fiscal year ended June 30, 2008 compared to the year ended June 30, 2007, aided by the acquisition, effective July 1, 2007, of Real Time Systems Inc., a developer, manufacturer and seller of air gun controllers/synchronizers (“RTS”). The Company believes that the oilfield services industry will continue to be strong during fiscal 2009 because of the continued imbalance between supply and demand for hydrocarbons, low reserve replacement rates and high commodity prices. The Company also anticipates continued use of more sophisticated technology, such as 4-D and wide-azimuth seismic exploration surveys. In particular, wide-azimuth surveys create a need for a larger seismic vessel fleet because such surveys require utilization of several vessels working in tandem.

Effective May 31, 2008, the Company sold substantially all of the assets of its wholly-owned subsidiary, Custom Products Corporation (“Custom”). Custom, a developer, manufacturer and seller of miniature industrial clutches and brakes and seller of sub-fractional horsepower electrical motors, formerly comprised the Company’s “industrial products” segment. Custom was the only unit in the industrial products segment. Therefore, due to the sale of Custom, the Company operates only in the oilfield services equipment business. In the Consolidated Financial Statements, amounts relating to Custom have been reported as discontinued operations in fiscal year 2008 and prior fiscal year information relating to Custom has been restated as discontinued operations. See Note 3 to Consolidated Financial Statements for further information concerning discontinued operations.

Primarily due to the increase in oilfield services equipment sales and secondarily due to the sale of Custom’s assets, as described above, the Company’s balance sheet continued to strengthen during fiscal 2008. Working capital at June 30, 2008 was $39.2 million compared to $26.9 million at June 30, 2007.

Liquidity and Capital Resources

As of June 30, 2008, the Company believes that current cash and cash equivalent balances are, and projected cash flow from operations in fiscal 2009 will be, adequate to meet foreseeable operating needs in fiscal 2009 as well as any possible earnout payments associated with the acquisition of RTS. See Note 2 to Consolidated Financial Statements for further information concerning the RTS acquisition.

In May 2007, the Company entered into a $4,000,000 unsecured revolving credit agreement with a bank to provide funds for general corporate purposes should the need arise. During fiscal 2008 and 2007, the Company did not borrow against this facility. See Note 15 to Consolidated Financial Statements for further information concerning the revolving credit agreement.

Year Ended June 30, 2008

At June 30, 2008, the Company had $19,137,000 in cash and cash equivalents compared to $9,988,000 at June 30, 2007.

In fiscal 2008, cash flow from continuing operating activities after changes in working capital items was $9,332,000, primarily due to net income adjusted for depreciation, deferred taxes and stock based

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compensation expense and partially offset by higher inventories and lower current liabilities. In fiscal 2008, cash flow from discontinued operating activities after changes in working capital items was $846,000.

In fiscal 2008, the Company used $4,472,000, net of $147,000 of cash acquired, for the acquisition of RTS and $1,610,000 for capital expenditures relating to continuing operations. These capital expenditures relate primarily to new and replacement equipment and a small expansion of the Cypress, Texas manufacturing facility. In fiscal 2008, the Company used $73,000 for capital expenditures relating to discontinued operations and received net proceeds from the sale of discontinued operations of $5,078,000.

The Company anticipates that capital expenditures for fiscal 2009 will approximate $1,000,000, which will be funded from operating cash flow. These anticipated capital expenditures will relate primarily to new and replacement production machinery and leasehold improvements relating to a new leased manufacturing facility in Fredericksburg, Texas (refer to “Contractual Obligations” below for additional information regarding this facility).

Since a relatively small number of customers account for the majority of the Company’s sales, the consolidated accounts receivable balance at the end of any period tends to be concentrated in a small number of customers. At June 30, 2008 and June 30, 2007, the five customers with the highest accounts receivable balances represented, in the aggregate, 62% and 67%, respectively, of the consolidated accounts receivable balances on those dates.

Year Ended June 30, 2007

At June 30, 2007, the Company had $9,988,000 in cash and cash equivalents. This amount was $5,408,000 or 118% higher than the amount of cash and cash equivalents at June 30, 2006.

In fiscal 2007, cash flow from continuing operating activities after changes in working capital items was $3,871,000, primarily due to net income adjusted for depreciation and higher current liabilities partially offset by higher accounts receivable and inventories. In fiscal 2007, cash flow from discontinued operating activities after changes in working capital items was $795,000.

In fiscal 2007, the Company used $837,000 for capital expenditures relating to continuing operations for new and replacement equipment and $112,000 for capital expenditures relating to discontinued operations.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet financing arrangements.

Contractual Obligations

The Company had no long-term borrowings, capital leases, purchase obligations or other long-term liabilities at June 30, 2008 or 2007. The Company has an unsecured $4,000,000 revolving credit facility with a bank (see Note 15 to Consolidated Financial Statements for further information regarding this facility). During fiscal 2008 and 2007, there were no borrowings under this facility. The Company is obligated for minimum lease payments as of June 30, 2008 under several operating leases for its facilities as follows:

	Total		Payments Due by Period
Contractual Obligations			Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating Lease Obligations	$	1,566,000	$	348,000	$	696,000	$	522,000	$	—

Such amounts are exclusive of any “additional rent” for taxes, utilities or similar charges, under triple net leases. See Note 12 to Consolidated Financial Statements under “Lease Commitments” for further information regarding future payments and other information relating to such leases.

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The Company will be relocating the RTS facility to new leased premises (approximately 7,000 square feet) in Fredericksburg, Texas under a five-year, triple net, operating lease. As of June 30, 2008, the Company had not yet finalized a lease with the lessor, which is an affiliate of the President and former owner of RTS. Capital expenditures to be incurred by the Company in fiscal 2009 relating to this facility are estimated to be $120,000.

Results of Operations

Year Ended June 30, 2008 Compared to Year Ended June 30, 2007

Consolidated sales for the year ended June 30, 2008 totaled $61,635,000, an increase of $14,706,000 or 31% from fiscal year 2007 primarily due to higher volume of sales of complete energy source systems, air gun replacement parts, underwater electrical connectors and cables, and effective July 1, 2007, sales of air gun controllers/synchronizers, data loggers and auxiliary equipment. Higher sales reflected continued strength in marine seismic activity and the acquired RTS business, which contributed sales of $5,465,000.

Consolidated gross profit as a percentage of consolidated sales was 46% for the year ended June 30, 2008, unchanged from the year ended June 30, 2007. The gross profit in fiscal 2008 was positively impacted by higher gross profit associated with the acquired RTS business, partially offset by lower gross profit associated with certain foreign sales, which included sales of auxiliary equipment purchased from outside vendors that normally have a lower margin than the Company’s proprietary products.

Research and development costs for the year ended June 30, 2008 increased by $2,000 or 1% from the year ended June 30, 2007. These expenditures were associated with work being done to improve the Company’s Annular Port Air Guns (“APG guns”) and Seismic Source Monitoring System (“SSMS”).

Selling, general and administrative (“SG&A”) expenses increased by $1,462,000 in fiscal year 2008 from fiscal year 2007 due primarily to the SG&A expenses of RTS ($661,000), additional personnel and salary increases ($341,000), bad debt expense ($201,000), stock based compensation expense ($158,000) and shareholder relations expenses ($80,000), partially offset by lower professional fees ($285,000) due primarily to lower Sarbanes-Oxley compliance costs.

The Company conducted an annual impairment test of goodwill balances as of July 1, 2008 and 2007. The results of these tests indicated that there was no impairment of the June 30, 2008 and 2007 goodwill balances.

The provision for income taxes for the year ended June 30, 2008 was $6,453,000, an effective tax rate of 32%. This rate was lower than the federal statutory rate of 35% due primarily to the tax benefit associated with the manufacturer’s deduction. The provision for income taxes for year ended June 30, 2007 was $4,758,000, an effective tax rate of 32%. This rate was lower than the federal statutory rate of 35%, primarily due to the tax benefits associated with export sales and the manufacturer’s deduction, partially offset by state income taxes.

The above mentioned factors resulted in income from continuing operations for the year ended June 30, 2008 of $13,709,000 compared to income from continuing operations of $9,999,000 for the year ended June 30, 2007.

Effective May 31, 2008, substantially all of the assets of Custom Products Corporation (“Custom”), a wholly owned subsidiary of Bolt, were sold for $5,250,000, subject to adjustments for certain liabilities. Custom, a developer, manufacturer and seller of miniature industrial clutches and brakes and seller of sub-fractional horsepower electrical motors, was formerly in the Company’s “industrial products” segment. Custom was the only unit in the industrial products segment; therefore, due to the sale of Custom, the Company now operates only in the oilfield services equipment business. In the Consolidated Financial Statements, reported amounts relating to Custom have been reported as discontinued operations. During the year ended June 30, 2008, the Company recorded as discontinued operations the operating results of Custom for the eleven-month period ending May 31, 2008 of $575,000, net of income taxes, and a gain on the sale of the assets of Custom of

16

$285,000, net of income taxes. In addition, prior year information relating to Custom was restated to report such information as discontinued operations. During the year ended June 30, 2007, income from discontinued operations was $608,000, net of income taxes. See the Consolidated Financial Statements and Note 3 to Consolidated Financial Statements for additional information concerning discontinued operations.

The above mentioned factors resulted in net income for the year ended June 30, 2008 of $14,569,000 compared to net income of $10,607,000 for the year ended June 30, 2007.

Year Ended June 30, 2007 Compared to Year Ended June 30, 2006

Consolidated sales for the year ended June 30, 2007 totaled $46,929,000, an increase of $17,536,000 or 60% from fiscal year 2006 primarily due to higher volume of sales of complete energy source systems, air gun replacement parts, underwater electrical connectors and cables and SSMS. Higher sales reflected continued strength in marine seismic activity.

Consolidated gross profit as a percentage of consolidated sales was 46% for the year ended June 30, 2007 versus 41% for the year ended June 30, 2006. The gross profit improvement was due to higher manufacturing efficiencies associated with the 60% increase in sales and higher pricing, partially offset by higher material and labor costs. In addition, the gross profit for the year ended June 30, 2006 was adversely affected by sales of auxiliary equipment purchased from third party suppliers. Third party auxiliary equipment had significantly lower margin than the Company’s proprietary products.

Research and development costs for the year ended June 30, 2007 decreased by $19,000 or 7% from the year ended June 30, 2006. These expenditures were associated with work being done to improve the Company’s APG guns and SSMS. The decrease was primarily due to lower spending for SSMS.

Selling, general and administrative expenses increased by $1,512,000 for the year ended June 30, 2007 from the year ended June 30, 2006 due primarily to higher professional fees ($713,000), compensation expense ($611,000) and freight out ($125,000). Higher professional fees were primarily due to the incremental expenses incurred to become compliant with Section 404 of the Sarbanes-Oxley Act of 2002. The increase in compensation expense primarily reflected higher incentive compensation, the addition of personnel and salary increases. Higher freight out reflects the 60% increase in consolidated sales.

The Company conducted an annual impairment test of goodwill balances as of July 1, 2007 and 2006. The results of these tests indicated that there was no impairment of the June 30, 2007 and 2006 goodwill balances.

The provision for income taxes for the year ended June 30, 2007 was $4,758,000, an effective tax rate of 32%. This rate was lower than the federal statutory rate of 35% due primarily to tax benefits associated with export sales and the manufacturer’s deduction, partially offset by state income taxes. The provision for income taxes for the year ended June 30, 2006 was $2,352,000, an effective tax rate of 35%. This rate was higher than the federal statutory rate of 34%, primarily due to state income taxes, partially offset by the tax benefits associated with export sales and the manufacturer’s deduction.

The above mentioned factors resulted in income from continuing operations for the year ended June 30, 2007 of $9,999,000 compared to income from continuing operations of $4,407,000 for the year ended June 30, 2006.

During the year ended June 30, 2007, income from discontinued operations was $608,000, net of income taxes, versus $438,000 for the year ended June 30, 2006. See the Consolidated Financial Statements and Note 3 to Consolidated Financial Statements for additional information concerning discontinued operations.

The above mentioned factors resulted in net income for the year ended June 30, 2007 of $10,607,000 compared to net income of $4,845,000 for the year ended June 30, 2006.

17

Critical Accounting Policies

The methods, estimates and judgments the Company uses in applying the accounting policies most critical to its financial statements have a significant impact on the results the Company reports in its financial statements. The Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of the Company’s financial condition and results, and requires the Company to make its most difficult and subjective judgments.

Based on this definition, the Company’s most critical accounting policies include: revenue recognition, recording of inventory reserves, deferred taxes, and the potential impairment of goodwill. These policies are discussed below. The Company also has other key accounting policies, including the establishment of bad debt reserves. The Company believes that these other policies either do not generally require it to make estimates and judgments that are as difficult or as subjective, or are less likely to have a material impact on the Company’s reported results of operations for a given period.

Although the Company believes that its estimates and assumptions are reasonable, they are based upon information available at the end of each reporting period and involve inherent risks and uncertainties. Actual results may differ significantly from the Company’s estimates and its estimates could be different using different assumptions or conditions.

See Note 1 to Consolidated Financial Statements for additional information concerning significant accounting policies.

Revenue Recognition

The Company recognizes sales revenue when it is realized and earned. The Company’s reported sales revenue is based on meeting the following criteria: (1) manufacturing products based on customer specifications; (2) delivering product to the customer before the close of the reporting period, whereby delivery results in the transfer of ownership risk to the customer; (3) establishing a set sales price with the customer; (4) collecting the sales revenue from the customer is reasonably assured; and (5) no contingencies exist.

Inventory Reserves

A significant source of the Company’s revenue arises from the sale of replacement parts required by customers who have previously purchased products. As a result, the Company maintains a large quantity of parts on hand that may not be sold or used in final assemblies for an extended period of time. In order to recognize that certain inventory may become obsolete or that the Company may have supplies in excess of reasonably supportable sales forecasts, an inventory valuation reserve has been established. The inventory valuation reserve is a significant estimate made by management. Actual results may differ from this estimate, and the difference could be material.

Management establishes the inventory valuation reserve by reviewing the inventory for items that should be reserved in full based on a lack of usage for a specified period of time and for which future demand is not forecasted and establishes an additional reserve for slow moving inventory based on varying percentages of the cost of the items. The reserve for inventory valuation at June 30, 2008 and 2007 was $406,000 and $524,000, respectively. At June 30, 2008 and 2007, approximately $1,247,000 and $1,401,000, respectively, of the raw materials and sub-assemblies inventory were considered slow moving and subject to a reserve provision equal to all or a portion of the cost, less an estimate for scrap value. In certain instances, this inventory has been unsold for more than five years from date of manufacture or purchase, and in other instances the Company has more than a five-year supply of inventory on hand based on recent sales volume. At June 30, 2008, the cost of inventory for which the Company has more than a five-year supply on hand and the cost of inventory for which the Company has had no sales during the last five years amounted to approximately $780,000. Management

18

believes that this inventory is properly valued and appropriately reserved. Even if management’s estimate were incorrect, that would not result in a cash outlay since the cash required to manufacture or purchase the older inventory was expended in prior years.

The inventory valuation reserve is adjusted at the close of each accounting period, as necessary, based on management’s estimate of the valuation reserve required. This estimate is calculated on a consistent basis as determined by the Company’s inventory valuation policy. Increases to the inventory valuation reserve result in a charge to cost of sales, and decreases to the reserve result in a credit to cost of sales. The inventory valuation reserve is also decreased when items are scrapped or disposed of. During the fiscal year ended June 30, 2008, the inventory valuation reserve was decreased by $118,000, and the Company did not scrap or dispose of any items.

Deferred Taxes

The Company applies an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. The recoverability of deferred tax assets is dependent upon the Company’s assessment of whether it is more likely than not that sufficient future taxable income will be generated in the relevant tax jurisdiction to utilize the deferred tax asset. The Company reviews its internal forecasted sales and pre-tax earnings estimates to make its assessment about the utilization of deferred tax assets. In the event the Company determines that future taxable income will not be sufficient to utilize the deferred tax asset, a valuation allowance is recorded. If that assessment changes, a charge or a benefit would be recorded in the consolidated statement of income. The Company has concluded that no deferred tax valuation allowance was necessary at June 30, 2008 and June 30, 2007 because future taxable income is believed to be sufficient to utilize any deferred tax asset.

Goodwill Impairment Testing

As required by SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company reviews goodwill for impairment annually or more frequently if impairment indicators arise. Management tested goodwill for impairment as of July 1, 2008 and 2007 and the tests indicated no impairment of the goodwill balances at June 30, 2008 and 2007.

Goodwill represents approximately 17% of the Company’s total assets at June 30, 2008 and is thus a significant estimate by management. Even if management’s estimate were incorrect, it would not result in a cash outlay because the goodwill amounts arose out of acquisition accounting. See Notes 1, 2 and 4 to Consolidated Financial Statements for additional information concerning goodwill.

Recent Accounting Developments

Business Combinations

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”), which is a revision of SFAS 141. SFAS 141(R) continues to require the purchase method of accounting for business combinations and the identification and recognition of intangible assets separately from goodwill. SFAS 141(R) requires, among other things, the buyer to: (1) fair value assets and liabilities acquired as of the acquisition date (i.e., a “fair value” model rather than a “cost allocation” model); (2) expense acquisition-related costs; (3) recognize assets or liabilities assumed arising from contractual contingencies at acquisition date using acquisition-date fair values; (4) recognize goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest over the acquisition-date fair value of net assets acquired; (5) recognize at acquisition any contingent consideration using acquisition-date fair values (i.e., fair value earn-outs in the initial accounting for the acquisition); and (6) eliminate the recognition of liabilities for restructuring costs expected to be incurred as a result of the business combination. SFAS 141(R) also defines a “bargain” purchase as a business

19

combination where the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus the fair value of any noncontrolling interest. Under this circumstance, the buyer is required to recognize such excess (formerly referred to as “negative goodwill”) in earnings as a gain. In addition, if the buyer determines that some or all of its previously booked deferred tax valuation allowance is no longer needed as a result of the business combination, SFAS 141(R) requires that the reduction or elimination of the valuation allowance be accounted as a reduction of income tax expense. SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008. The Company will apply SFAS 141(R) to any acquisitions that are made on or after July 1, 2009.

The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits companies to measure many financial instruments and certain other items at fair value. SFAS 159 is effective as of the beginning of the Company’s first fiscal year that begins after November 15, 2007. The Company believes that SFAS 159 will not have an impact on the Company’s consolidated financial statements.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require new fair value measurements. The purpose of SFAS 157 is to provide a single definition of fair value and to provide additional guidance relative to fair value measurements. The end result of SFAS 157 application will be consistency and comparability in fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company believes that it is unlikely that SFAS 157 will have any impact on the Company’s consolidated financial statements because the Company does not deal in transactions requiring complex fair value measurements.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

None.

ITEM 8. Financial Statements and Supplementary Data

The information required under this Item 8 is set forth on pages F-1 through F-23 of this Report.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

The chief executive officer and the chief financial officer, with the assistance of key employees throughout the Company, including its subsidiaries, evaluated the Company’s disclosure controls and procedures as of June 30, 2008. Based upon the results of such evaluation, the chief executive officer and chief financial officer have concluded that such disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

20

See page F-1 of this Report for Management’s Report on Internal Control Over Financial Reporting and page F-2 of this Report for Report of Independent Registered Public Accounting Firm on the effectiveness of the Company’s internal control over financial reporting.

There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. Other Information

None.

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PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

The information required by Item 10 is incorporated by reference to the information appearing under the captions “Election of Directors,” “Management,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “General Information Relating to the Board of Directors” in the Company’s definitive proxy statement relating to the 2008 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K (the “Definitive Proxy Statement”).

ITEM 11. Executive Compensation

The information required by Item 11 is incorporated by reference to the information appearing under the captions “Executive Compensation” and “General Information Relating to the Board of Directors” in the Definitive Proxy Statement.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 is incorporated by reference to the information appearing under the caption “Equity Compensation Plan Information” under Part II, Item 5 of this Form 10-K and the information appearing under the captions “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” in the Definitive Proxy Statement.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 is incorporated by reference to the information appearing under the captions “Certain Relationships and Related Transactions” and “General Information Relating to the Board of Directors” in the Definitive Proxy Statement.

ITEM 14. Principal Accountant Fees and Services

The information required by Item 14 is incorporated by reference to the information appearing under the caption “Relationship with Independent Accountants” in the Definitive Proxy Statement.

22

PART IV

ITEM 15. Exhibits and Financial Statement Schedules

The following are being filed as part of this Annual Report on Form 10-K:

(a) Financial Statements and Financial Statement Schedule

Consolidated Financial Statements

	Page Number
Management’s Report on Internal Control Over Financial Reporting	F-1
Reports of Independent Registered Public Accounting Firm	F-2 through F-3
Consolidated Balance Sheets as of June 30, 2008 and 2007	F-4
Consolidated Statements of Income for the Years Ended June 30, 2008, 2007 and 2006	F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 2008, 2007 and 2006	F-6
Notes to Consolidated Financial Statements	F-7 through F-22
Financial Statement Schedule for the Years Ended June 30, 2008, 2007 and 2006
II—Valuation and Qualifying Accounts	F-23

Schedules other than the one listed above are omitted because they are not applicable, or the required information is shown in the financial statements or the notes thereto.

(b) Exhibits

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).
3.2	Bylaws of the Registrant, amended and restated effective as of January 23, 2008 (incorporated by reference to Exhibit 3.1 to Form 8-K Current Report, SEC File No. 001-12075, dated January 23, 2008 and filed with the Commission on January 25, 2008).
10.1	Bolt Technology Corporation Amended and Restated 2006 Stock Option and Restricted Stock Plan together with (i) Form of Incentive Stock Option Agreement, (ii) Form of Nonqualified Stock Option Agreement, (iii) Form of Non-Employee Director Nonqualified Stock Option Agreement, and (iv) Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).†
10.2	Bolt Technology Corporation Amended and Restated Severance Compensation Plan together with Form of Designation of Participation (incorporated by reference to Exhibit 10.2 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).†
10.3	Lease Agreement dated January 10, 2003 between 381 Connecticut Avenue Corporation and Bolt Technology Corporation (incorporated by reference to Exhibit 10.6 to Form 10-K for the year ended June 30, 2003, SEC File No. 001-12075).
10.4	Lease Agreement dated January 10, 2003 between 381 Connecticut Avenue Corporation and Bolt Technology Corporation (incorporated by reference to Exhibit 10.7 to Form 10-K for the year ended June 30, 2003, SEC File No. 001-12075).

23

Exhibit No.	Description
10.5	Employment Agreement between Bolt Technology Corporation and Raymond M. Soto effective as of June 10, 1996; Amendment to Employment Agreement between Bolt Technology Corporation and Raymond M. Soto effective as of September 20, 2001 (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2006, SEC File No. 001-12075); Amendment to Employment Agreement between Bolt Technology Corporation and Raymond M. Soto effective as of November 20, 2007 (incorporated by reference to Exhibit 10.3 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).†
10.6	Restricted Stock Award Agreement by and between Bolt Technology Corporation and Raymond M. Soto dated as of January 23, 2008 (incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended March 31, 2008, SEC File No. 001-12075).†
10.7	Employment Agreement between Custom Products Corporation and Gerald H. Shaff effective as of January 1, 2003 (incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended June 30, 2003, SEC File No. 001-12075); Letter Agreement dated as of February 9, 2005 amending the Employment Agreement between Custom Products Corporation and Gerald H. Shaff, effective as of January 1, 2003 (incorporated by reference to Exhibit 10.8 to Form 10-Q for the quarter ended December 31, 2004, SEC File No. 001-12075).†
10.8	Employment Agreement between A-G Geophysical Products, Inc. and Michael C. Hedger, dated May 13, 2005 (incorporated by reference to Exhibit 10.10 to Form 10-Q for the quarter ended March 31, 2005, SEC File No. 001-12075); Amendment to Employment Agreement between A-G Geophysical Products, Inc. and Michael C. Hedger effective as of November 20, 2007 (incorporated by reference to Exhibit 10.4 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).†
10.9	Asset Purchase Agreement by and among Real Time Systems Inc., Embedded Microsystems, Inc. dba Real Time Systems, W. Allen Nance and Molly L. Nance dated July 10, 2007 (incorporated by reference to Exhibit 10.1 to Form 8-K Current Report, SEC File No. 001-12075, dated July 10, 2007 and filed with the Commission on July 12, 2007).
10.10	Employment Agreement by and between Real Time Systems Inc. and W. Allen Nance dated July 10, 2007 (incorporated by reference to Exhibit 10.2 to Form 8-K Current Report, SEC File No. 001-12075, dated July 10, 2007 and filed with the Commission on July 12, 2007).†
10.11	Non-Competition Agreement by and among Real Time Systems Inc., Bolt Technology Corporation, Embedded Microsystems, Inc. dba Real Time Systems and W. Allen Nance dated July 10, 2007 (incorporated by reference to Exhibit 10.3 to Form 8-K Current Report, SEC File No. 001-12075, dated July 10, 2007 and filed with the Commission on July 12, 2007).
10.12	Asset Purchase Agreement by and among Custom Products Corporation, Bolt Technology Corporation and A&A Manufacturing Co., Inc. dated May 6, 2008.*
21	Subsidiaries of the Registrant.*
23	Consent of Independent Registered Public Accounting Firm.*
31.1	Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*
31.2	Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*

24

Exhibit No.	Description
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*
99.1	Commercial Loan Agreement, dated as of May 30, 2007, by and among Webster Bank National Association, Bolt Technology Corporation, A-G Geophysical Products, Inc. and Custom Products Corporation (incorporated by reference to Exhibit 99.1 to Form 10-K for the year ended June 30, 2007, SEC File No. 001-12075).

* Filed herewith

† Management contract or compensatory plan

25

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BOLT TECHNOLOGY CORPORATION
Date: September 12, 2008	By:	/s/    RAYMOND M. SOTO
		Raymond M. Soto
		(Chairman of the Board, President and
		Chief Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    RAYMOND M. SOTO         (Raymond M. Soto)	Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer)	September 12, 2008
/s/    JOSEPH ESPESO         (Joseph Espeso)	Senior Vice President—Finance, Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer)	September 12, 2008
/s/    KEVIN M. CONLISK         (Kevin M. Conlisk)	Director	September 12, 2008
/s/    MICHAEL H. FLYNN         (Michael H. Flynn)	Director	September 12, 2008
/s/    MICHAEL C. HEDGER         (Michael C. Hedger)	Director	September 12, 2008
/s/    GEORGE R. KABURECK         (George R. Kabureck)	Director	September 12, 2008
/s/    JOSEPH MAYERICK, JR.         (Joseph Mayerick, Jr.)	Director	September 12, 2008
/s/    STEPHEN F. RYAN         (Stephen F. Ryan)	Director	September 12, 2008
/s/    GERALD A. SMITH         (Gerald A. Smith)	Director	September 12, 2008

26

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING

The management of Bolt Technology Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934.

Internal control over financial reporting, no matter how well designed, has inherent limitations. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting could vary over time.

The management of Bolt Technology Corporation, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation to assess the effectiveness of our internal control over financial reporting as of June 30, 2008 based upon criteria set forth in the “Internal Control—Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we believe that, as of June 30, 2008, our internal control over financial reporting is effective.

The effectiveness of our internal control over financial reporting as of June 30, 2008 has been audited by McGladrey & Pullen, LLP, our independent registered public accounting firm, as stated in their report which appears on page F-2 of this Annual Report on Form 10-K.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Bolt Technology Corporation and Subsidiaries

We have audited Bolt Technology Corporation and subsidiaries’ internal control over financial reporting as of June 30, 2008, based on, “criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)”. Bolt Technology Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Bolt Technology Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 30, 2008, based on “criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).”

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Bolt Technology Corporation and subsidiaries and our report dated September 10, 2008 expressed an unqualified opinion.

/s/ McGladrey & Pullen, LLP

Stamford, Connecticut

September 10, 2008

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Bolt Technology Corporation and Subsidiaries

We have audited the consolidated balance sheets of Bolt Technology Corporation and subsidiaries as of June 30, 2008 and 2007, and the related consolidated statements of income and cash flows for each of the three years in the period ended June 30, 2008. Our audits also included the financial statement schedule of Bolt Technology Corporation listed in Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bolt Technology Corporation and subsidiaries as of June 30, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Bolt Technology Corporation and subsidiaries’ internal control over financial reporting as of June 30, 2008, based on “criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)” and our report dated September 10, 2008, expressed an unqualified opinion on the effectiveness of Bolt Technology Corporation’s internal control over financial reporting.

/s/McGladrey & Pullen, LLP

Stamford, Connecticut

September 10, 2008

F-3

Bolt Technology Corporation and Subsidiaries

Consolidated Balance Sheets

	June 30,
	2008		2007
Assets
Current Assets:
Cash and cash equivalents	$	19,137,000	$	9,988,000
Accounts receivable, less allowance for uncollectible accounts of $81,000 in 2008 and $63,000 in 2007		11,067,000		10,199,000
Inventories		14,879,000		11,281,000
Deferred income taxes		190,000		228,000
Other current assets		252,000		461,000
Current assets of discontinued operations		—		1,065,000
Total current assets		45,525,000		33,222,000
Property, Plant and Equipment, net		4,331,000		3,056,000
Goodwill, net		10,330,000		7,679,000
Other Intangible Assets, net		1,472,000		—
Other Assets		209,000		222,000
Long-term Assets of Discontinued Operations		—		3,439,000
Total assets	$	61,867,000	$	47,618,000
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	2,479,000	$	3,615,000
Accrued expenses		3,045,000		2,565,000
Income taxes payable		826,000		—
Current liabilities of discontinued operations		—		110,000
Total current liabilities		6,350,000		6,290,000
Deferred income taxes of discontinued operations		—		642,000
Total liabilities		6,350,000		6,932,000
Stockholders’ Equity:
Common stock, no par value, authorized 20,000,000 shares (9,000,000 shares in 2007); issued and outstanding 8,618,093 shares (8,581,598 shares in 2007)		28,597,000		28,335,000
Retained Earnings		26,920,000		12,351,000
Total stockholders’ equity		55,517,000		40,686,000
Total liabilities and stockholders’ equity	$	61,867,000	$	47,618,000

See Notes to Consolidated Financial Statements.

F-4

Bolt Technology Corporation and Subsidiaries

Consolidated Statements of Income

	For the Years Ended June 30,
	2008			2007			2006
Revenues:
Sales	$	61,635,000		$	46,929,000		$	29,393,000
Costs and Expenses:
Cost of sales		33,164,000			25,347,000			17,226,000
Research and development		272,000			270,000			289,000
Selling, general and administrative		8,228,000			6,766,000			5,254,000
Interest income		(191,000	)		(211,000	)		(135,000	)
		41,473,000			32,172,000			22,634,000
Income from continuing operations before income taxes		20,162,000			14,757,000			6,759,000
Provision for income taxes		6,453,000			4,758,000			2,352,000
Income from continuing operations		13,709,000			9,999,000			4,407,000
Discontinued operations:
Income from discontinued operations, net of taxes		575,000			608,000			438,000
Gain on sale of discontinued operations, net of taxes		285,000			—			—
Discontinued operations, net of taxes		860,000			608,000			438,000
Net income	$	14,569,000		$	10,607,000		$	4,845,000
Earnings Per Share:
Earnings per share—basic
Income from continuing operations	$	1.60		$	1.19		$	0.54
Income from discontinued operations, net of taxes		0.07			0.07			0.05
Gain on sale of discontinued operations, net of taxes		0.03			—			—
Net income	$	1.70		$	1.26		$	0.59
Earnings per share—diluted
Income from continuing operations	$	1.60		$	1.17		$	0.52
Income from discontinued operations, net of taxes		0.07			0.07			0.05
Gain on sale of discontinued operations, net of taxes		0.03			—			—
Net income	$	1.70		$	1.24		$	0.57
Average number of common shares outstanding:
Basic		8,581,491			8,415,689			8,196,399
Diluted		8,586,518			8,523,549			8,446,151

See Notes to Consolidated Financial Statements.

F-5

Bolt Technology Corporation and Subsidiaries

Consolidated Statements of Cash Flows

	2008			2007			2006
Cash Flows From Operating Activities:
Net income	$	14,569,000		$	10,607,000		$	4,845,000
Less: Income from discontinued operations, net of taxes		(860,000	)		(608,000	)		(438,000	)
Income from continuing operations		13,709,000			9,999,000			4,407,000
Adjustments to reconcile income from continuing operations to cash provided by operating activities:
Depreciation and amortization		667,000			319,000			274,000
Deferred income taxes		57,000			(2,000	)		122,000
Stock based compensation expense		214,000			56,000			—
Change in operating assets and liabilities, net of RTS acquisition effect:
Accounts receivable		(453,000	)		(3,009,000	)		(4,542,000	)
Inventories		(3,225,000	)		(3,699,000	)		(1,148,000	)
Other assets		225,000			(232,000	)		(98,000	)
Accounts payable		(1,136,000	)		1,274,000			270,000
Accrued expenses		(386,000	)		323,000			1,265,000
Income taxes payable		(340,000	)		(1,158,000	)		810,000
Customer deposit		—			—			(414,000	)
Net cash provided by continuing operations		9,332,000			3,871,000			946,000
Net cash provided by discontinued operations		846,000			795,000			562,000
Net cash provided by operating activities		10,178,000			4,666,000			1,508,000
Cash Flows From Investing Activities:
Purchase of Real Time Systems Inc., net of cash received		(4,472,000	)		—			—
Purchase of property, plant and equipment, continuing operations		(1,610,000	)		(837,000	)		(971,000	)
Purchase of property, plant and equipment, discontinued operations		(73,000	)		(112,000	)		(23,000	)
Net proceeds from sale of discontinued operations		5,078,000			—			—
Net cash used in investing activities		(1,077,000	)		(949,000	)		(994,000	)
Cash Flows From Financing Activities:
Exercise of stock options		—			403,000			412,000
Tax benefits on stock options exercised		53,000			1,288,000			—
Payment for fractional shares (3-for-2 stock split)		(5,000	)		—			—
Net cash provided by financing activities		48,000			1,691,000			412,000
Net increase in cash		9,149,000			5,408,000			926,000
Cash and cash equivalents at beginning of year		9,988,000			4,580,000			3,654,000
Cash and cash equivalents at end of year	$	19,137,000		$	9,988,000		$	4,580,000
Supplemental disclosure of cash flow information:
Cash transactions:
Income taxes paid	$	6,767,000		$	4,824,000		$	1,513,000
Non-cash transactions:
Transfer of inventory to property, plant and equipment	$	—		$	—		$	88,000

See Note 2 to Consolidated Financial Statements for allocation of RTS purchase price.

See Notes to Consolidated Financial Statements.

F-6

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

Note 1—Description of Business and Significant Accounting Policies

The Company consists of three operating units: Bolt Technology Corporation (“Bolt”), A-G Geophysical Products, Inc. (“A-G”) and Real Time Systems Inc. (“RTS”), which was acquired on July 1, 2007 (see Note 2 to Consolidated Financial Statements). Bolt, A-G and RTS are in the oilfield services equipment business. Bolt develops, manufactures and sells marine seismic energy sources (air guns) and replacement parts; A-G develops, manufactures and sells underwater cables, connectors, hydrophones and seismic source monitoring systems; and RTS develops, manufactures and sells air gun controllers/synchronizers, data loggers and auxiliary equipment.

On May 31, 2008, substantially all of the assets of Custom Products Corporation (“Custom”), a wholly owned subsidiary of Bolt, were sold. Custom, a developer, manufacturer and seller of miniature industrial clutches and brakes and seller of sub-fractional horsepower electrical motors, formerly comprised the Company’s “industrial products” segment. Custom was the only operating unit in the industrial products segment; therefore, due to the sale of Custom, the Company now operates only in the oilfield services equipment business (formerly referred to as the “geophysical equipment” segment). In the Consolidated Financial Statements, amounts relating to Custom have been reported as discontinued operations in fiscal year 2008 and prior fiscal year information relating to Custom has been restated as discontinued operations. See Note 3 to Consolidated Financial Statements for additional information concerning discontinued operations.

On November 20, 2007, the Company’s Board of Directors approved a 3-for-2 stock split. The additional shares resulting from the stock split were distributed on January 30, 2008 to shareholders of record on January 16, 2008. Share and per share amounts reflected throughout the Consolidated Financial Statements and notes thereto have been restated to reflect the stock split.

Principles of Consolidation:

The Consolidated Financial Statements include the accounts of Bolt and its subsidiary companies. All significant intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents:

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Allowance for Uncollectible Accounts:

The allowance for uncollectible accounts is established through a provision for bad debts charged to expense. Accounts receivable are charged against the allowance for uncollectible accounts when the Company believes that collectibility of the principal is unlikely. The allowance is an amount that the Company believes will be adequate to absorb estimated losses on existing accounts receivable balances based on the evaluation of their collectibility and prior bad debt experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the accounts receivable, overall quality of accounts receivable, review of specific problem accounts receivable, and current economic and industry conditions that may affect customers’ ability to pay. While the Company uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic and industry conditions or any other factors considered in the Company’s evaluation. The allowance for uncollectible accounts balance and activity information is presented in Schedule II-Valuation and Qualifying Accounts for the Three Years Ended June 30, 2008.

F-7

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Inventories:

Inventories are valued at the lower of cost or market, with cost principally determined on an average cost method that approximates the first-in, first-out method. The Company maintains an inventory valuation reserve to provide for slow moving and obsolete inventory. Amounts are charged to the reserve when the Company scraps or disposes of inventory. See Note 6 to Consolidated Financial Statements for additional information concerning inventories.

Property, Plant and Equipment:

Property, plant and equipment are stated at cost. Depreciation for financial accounting purposes is computed using the straight-line method over the estimated useful lives of 40 years for buildings, over the shorter of the term of the lease or the estimated useful life for leasehold improvements, and 5 to 10 years for machinery and equipment. Major improvements which add to the productive capacity or extend the life of an asset are capitalized, while repairs and maintenance are charged to expense as incurred. See Note 7 to Consolidated Financial Statements for additional information concerning property, plant and equipment.

Goodwill and Other Long-Lived Assets:

Goodwill represents the unamortized excess cost over the value of net assets acquired in business combinations. As required by SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company tests goodwill for impairment annually or more frequently if impairment indicators arise. Step one of the goodwill impairment test is to compare the “fair value” of the reporting unit with its “carrying amount.” The fair value of a reporting unit is the amount that a willing party would pay to buy or sell the unit other than in a forced liquidation sale. The carrying amount of a reporting unit is total assets, including goodwill, minus total liabilities. If the fair value of a reporting unit is greater than the carrying amount, the Company considers goodwill not to be impaired. If the fair value is below the carrying amount, the Company would proceed to the next step, which is to measure the impairment loss. Any such impairment loss would be recognized in the Company’s results of operations in the period in which the impairment loss arose. Goodwill was tested for impairment as of July 1, 2008 and 2007, and the tests indicated no impairment of the goodwill balances at June 30, 2008 and 2007.

The Company’s approach to determining the fair value of the A-G and RTS reporting units was based on two different valuation methods: (a) a capitalized cash flow method which relies on historical financial performance, an estimate of the long-term growth rate in free cash flows and a determination of the weighted average cost of capital of each reporting unit and (b) a market price method that gives consideration to the prices paid for publicly traded stocks.

The estimated fair values of the A-G and RTS reporting units were determined utilizing each of the above methods, and the valuation methods were analyzed as indicators of value. Based on the foregoing, the Company determined that there was no impairment as of July 1, 2008 and 2007.

The Company’s other long-lived assets consist of property, plant and equipment, other intangible assets and other non-current assets. The Company reviews for the impairment of these assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount is considered impaired when anticipated undiscounted cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. The Company’s reviews as of June 30, 2008 and 2007 did not result in any indicators of impairment, and therefore no impairment tests were performed on these other long-lived assets.

F-8

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

See Notes 2, 4 and 5 to Consolidated Financial Statements for additional information concerning goodwill and other intangible assets.

Revenue Recognition and Warranty Costs:

The Company recognizes sales revenue when it is realized and earned. The Company’s reported sales revenue is based on meeting the following criteria: (1) manufacturing products based on customer specifications; (2) delivering product to the customer before the close of the reporting period, whereby delivery results in the transfer of ownership risk to the customer; (3) establishing a set sales price with the customer; (4) collecting the sales revenue from the customer is reasonably assured; and (5) no contingencies exist.

Warranty costs and product returns incurred by the Company have not been significant.

Income Taxes:

The provision for income taxes is determined under the liability method. Deferred tax assets and liabilities are recognized based on differences between the book and tax bases of assets and liabilities using currently enacted tax rates. The provision for income taxes is the sum of the amount of income tax paid or payable for the year determined by applying the provisions of enacted tax laws to the taxable income for that year and the net change during the year in the Company’s deferred tax assets and liabilities. See Note 8 to Consolidated Financial Statements for additional information concerning the provision for income taxes and deferred tax accounts.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. The most critical estimates made by the Company are those relating to inventory valuation reserves, goodwill impairment and the realization of deferred tax assets. Actual results could differ from those estimates.

F-9

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Computation of Earnings Per Share:

Basic earnings per share is computed by dividing net income by the average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the average number of common shares outstanding including common share equivalents (which includes stock option grants and restricted stock awards) assuming dilution. The following is a reconciliation of basic earnings per share to diluted earnings per share for each of the last three years:

	Years Ended June 30,
	2008		2007		2006
Income from continuing operations	$	13,709,000	$	9,999,000	$	4,407,000
Discontinued operations		860,000		608,000		438,000
Net income	$	14,569,000	$	10,607,000	$	4,845,000
Divided by:
Weighted average common shares		8,581,491		8,415,689		8,196,399
Weighted average common share equivalents		5,027		107,860		249,752
Total weighted average common shares and common share equivalents		8,586,518		8,523,549		8,446,151
Earnings per share—basic:
Income from continuing operations	$	1.60	$	1.19	$	0.54
Discontinued operations, net of income taxes		0.10		0.07		0.05
Net income	$	1.70	$	1.26	$	0.59
Earnings per share—diluted:
Income from continuing operations	$	1.60	$	1.17	$	0.52
Discontinued operations		0.10		0.07		0.05
Net income	$	1.70	$	1.24	$	0.57

For the fiscal years ended June 30, 2008 and 2007, the calculations do not include options to acquire 54,750 and 27,000 shares, respectively, since the inclusion of these shares would have been anti-dilutive.

Recent Accounting Developments:

Business Combinations

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”), which is a revision of SFAS 141. SFAS 141(R) continues to require the purchase method of accounting for business combinations and the identification and recognition of intangible assets separately from goodwill. SFAS 141(R) requires, among other things, the buyer to: (1) fair value assets and liabilities acquired as of the acquisition date (i.e., a “fair value” model rather than a “cost allocation” model); (2) expense acquisition-related costs; (3) recognize assets or liabilities assumed arising from contractual contingencies at acquisition date using acquisition-date fair values; (4) recognize goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest over the acquisition-date fair value of net assets acquired; (5) recognize at acquisition any contingent consideration using acquisition-date fair values (i.e., fair value earn-outs in the initial accounting for the acquisition); and (6) eliminate the recognition of liabilities for restructuring costs expected to be incurred as a result of the business combination. SFAS 141(R) also defines a “bargain” purchase as a business combination where the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair

F-10

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

value of the consideration transferred plus the fair value of any noncontrolling interest. Under this circumstance, the buyer is required to recognize such excess (formerly referred to as “negative goodwill”) in earnings as a gain. In addition, if the buyer determines that some or all of its previously booked deferred tax valuation allowance is no longer needed as a result of the business combination, SFAS 141(R) requires that the reduction or elimination of the valuation allowance be accounted as a reduction of income tax expense. SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008. The Company will apply SFAS 141(R) to any acquisitions that are made on or after July 1, 2009.

The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits companies to measure many financial instruments and certain other items at fair value. SFAS 159 is effective as of the beginning of the Company’s first fiscal year that begins after November 15, 2007. The Company believes that SFAS 159 will not have an impact on the Company’s consolidated financial statements.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require new fair value measurements. The purpose of SFAS 157 is to provide a single definition of fair value and to provide additional guidance relative to fair value measurements. The end result of SFAS 157 application will be consistency and comparability in fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company believes that it is unlikely that SFAS 157 will have any impact on the Company’s consolidated financial statements because the Company does not deal in transactions requiring complex fair value measurements.

Note 2—Real Time Systems Inc. Acquisition

In July 2007, the Company acquired substantially all of the net assets of Real Time Systems Inc. (RTS) for $5,379,000 including cash paid at closing of $4,532,000, acquisition costs of $87,000 and $760,000 due as of June 30, 2008 under an “earnout agreement.” RTS develops, manufactures and sells airgun controllers and synchronizers for seismic energy sources (air guns). RTS products are designed to control and synchronize up to 96 air guns in a single seismic exploration vessel. Effective July 1, 2007, the operations of RTS were included in the Company’s Consolidated Financial Statements.

The earnout agreement provides that additional payments are due if RTS’s net sales in each of fiscal years 2008 and 2009 are in excess of $2,000,000. Such payments are calculated at 33% of net sales, in each year, in excess of $2,000,000 but less than $2,500,000, and 20% of net sales, in each year, in excess of $2,500,000. Amounts earned under the earnout agreement are added to goodwill.

The purchase price allocation, including the earnout due as of June 30, 2008, is as follows:

Net current assets, including cash of $147,000	$	925,000
Property and equipment		91,000
Goodwill		2,651,000
Other intangible assets		1,712,000
	$	5,379,000

F-11

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

See Notes 4 and 5 to Consolidated Financial Statements for additional information concerning RTS goodwill and other intangible assets, respectively.

The following table summarizes, on an unaudited pro forma basis, the consolidated results of operations of the Company for the fiscal year ended June 30, 2007, assuming the acquisition of RTS was made on July 1, 2006.

Sales	$	52,161,000
Income from continuing operations	$	11,554,000
Income from discontinued operations		608,000
Net income	$	12,162,000
Earnings per share—basic:
Income from continuing operations	$	1.37
Income from discontinued operations		0.07
Net income	$	1.44
Earnings per share—diluted:
Income from continuing operations	$	1.36
Income from discontinued operations		0.07
Net income	$	1.43

The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations that might have occurred had the acquisition of RTS been consummated on July 1, 2006, nor are they necessarily indicative of results in the future.

Note 3—Discontinued Operations

Effective May 31, 2008, the Company sold substantially all of the assets of its wholly-owned subsidiary, Custom Products Corporation (“Custom”), for $5,250,000, subject to adjustments for certain liabilities. Custom, a developer, manufacturer and seller of miniature industrial clutches and brakes and seller of sub-fractional horsepower electrical motors, formerly comprised the Company’s industrial products segment. Net cash proceeds were $5,078,000 after expenses associated with the disposition ($88,000) and adjustments for liabilities. The Company recorded a pre-tax gain of $473,000 ($285,000 net of tax) relating to this transaction.

The following amounts relating to Custom’s operations have been reported as discontinued operations in the consolidated statements of income for the three years ended June 30:

	2008		2007		2006
Net sales	$	3,448,000	$	3,535,000	$	3,198,000
Income from discontinued operations before income taxes	$	926,000	$	897,000	$	671,000
Income taxes		351,000		289,000		233,000
Income from discontinued operations	$	575,000	$	608,000	$	438,000

See Note 1 to Consolidated Financial Statements for information regarding earnings per share, including earnings per share data relating to income from discontinued operations, net of taxes and the gain on sale of discontinued operations, net of taxes.

F-12

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

The consolidated balance sheet at June 30, 2007 has been restated to classify Custom’s assets and liabilities separately from assets and liabilities of continuing operations. These include: “current assets of discontinued operations” of $1,065,000, primarily consisting of accounts receivable and inventory; “long-term assets of discontinued operations” of $3,439,000, primarily consisting of goodwill; and “current liabilities of discontinued operations” of $110,000, primarily consisting of employee benefits.

The consolidated statements of cash flows reflect discontinued operations for all periods presented.

Note 4—Goodwill

The Company’s goodwill carrying amounts relate solely to the acquisitions of A-G in fiscal year 1999 and RTS in fiscal year 2008, which are two SFAS No. 142 reporting units. Bolt, the parent of A-G and RTS, is a third reporting unit and has no goodwill.

The composition of the net goodwill balance at June 30 is as follows:

	2008		2007
A-G	$	7,679,000	$	7,679,000
RTS		2,651,000		—
	$	10,330,000	$	7,679,000

Goodwill represents approximately 17% of the Company’s total assets at June 30, 2008 and thus the evaluation of goodwill impairment is a significant estimate by management. Even if management’s estimate were incorrect, it would not result in a cash outlay because the goodwill amounts arose out of acquisition accounting.

See Notes 1 and 2 to Consolidated Financial Statements for additional information concerning goodwill.

Note 5—Other Intangible Assets

Other intangible assets at June 30, 2008 in the gross amount of $1,712,000 represent the intangible assets acquired in the purchase of RTS. The major portion of these assets ($1,487,000) is being amortized using the straight-line method over a period of six to nine and one-half years. Amortization cost recorded in the fiscal year ended June 30, 2008 amounted to $240,000. Other intangible asset amortization over the next five years is estimated to be $240,000 per year ($60,000 per quarter).

See Note 2 to Consolidated Financial Statements for additional information concerning RTS intangible assets.

Note 6—Inventories

Inventories at June 30 consist of the following:

	2008			2007
Raw materials and sub-assemblies	$	13,849,000		$	11,087,000
Work-in-process		1,436,000			718,000
		15,285,000			11,805,000
Less-Reserve for inventory valuation		(406,000	)		(524,000	)
	$	14,879,000		$	11,281,000

F-13

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

A significant source of the Company’s revenue arises from the sale of replacement parts required by customers who have previously purchased products. As a result, the Company maintains a large quantity of parts on hand that may not be sold or used in final assemblies for an extended period of time. In order to recognize that certain inventory may become obsolete or that the Company may have supplies in excess of reasonably supportable sales forecasts, an inventory valuation reserve has been established. The inventory valuation reserve is a significant estimate made by management. Actual results may differ from this estimate, and the difference could be material.

Management establishes the inventory valuation reserve by reviewing the inventory for items that should be reserved in full based on a lack of usage for a specified period of time and for which future demand is not forecasted and establishes an additional reserve for slow moving inventory based on varying percentages of the cost of the items. The reserve for inventory valuation at June 30, 2008 and 2007 was $406,000 and $524,000, respectively. At June 30, 2008 and 2007, approximately $1,247,000 and $1,401,000, respectively, of the raw materials and sub-assemblies inventory were considered slow moving and subject to a reserve provision equal to all or a portion of the cost, less an estimate for scrap value. In certain instances, this inventory has been unsold for more than five years from date of manufacture or purchase, and in other instances the Company has more than a five-year supply of inventory on hand based on recent sales volume. At June 30, 2008, the cost of inventory for which the Company has more than a five-year supply on hand and the cost of inventory for which the Company has had no sales during the last five years amounted to approximately $780,000. Management believes that this inventory is properly valued and appropriately reserved. Even if management’s estimate were incorrect, that would not result in a cash outlay since the cash required to manufacture or purchase the older inventory was expended in prior years.

The inventory valuation reserve is adjusted at the close of each accounting period, as necessary, based on management’s estimate of the valuation reserve required. This estimate is calculated on a consistent basis as determined by the Company’s inventory valuation policy. Increases to the inventory valuation reserve result in a charge to cost of sales, and decreases to the reserve result in a credit to cost of sales. The inventory valuation reserve is also decreased when items are scrapped or disposed of. During the fiscal year ended June 30, 2008, the inventory valuation reserve was decreased by $118,000, and the Company did not scrap or dispose of any items.

Note 7—Property, Plant and Equipment

Property, plant and equipment at June 30 consist of the following:

	2008			2007
Land	$	253,000		$	253,000
Buildings		1,114,000			1,029,000
Leasehold improvements		495,000			381,000
Machinery and equipment		8,843,000			7,547,000
		10,705,000			9,210,000
Less—accumulated depreciation		(6,374,000	)		(6,154,000	)
	$	4,331,000		$	3,056,000

F-14

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Note 8—Income Taxes

Income tax expense consists of the following for the three years ended June 30:

	2008			2007			2006
Current:
Federal	$	6,507,000		$	4,732,000		$	2,064,000
State		(111,000	)		28,000			166,000
Deferred:
Federal		57,000			(26,000	)		98,000
State		—			24,000			24,000
Income tax expense	$	6,453,000		$	4,758,000		$	2,352,000

A reconciliation of the federal statutory rate to the effective tax rate reflected in the total provision for income taxes is as follows:

	Years Ended June 30,
	2008		2007		2006
Statutory rate	35	%	35	%	34	%
State income taxes, net of federal tax benefit	—		—		2
Nondeductible expenses	—		—		1
Exempt income from domestic production activities and foreign sales	(2	)	(2	)	(2	)
Other	(1	)	(1	)	—
Effective rate	32	%	32	%	35	%

Deferred income taxes under the liability method reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the Company’s net deferred income tax asset and liability accounts for continuing operations were as follows at June 30:

	2008			2007
Net deferred tax asset-current:
Inventory valuation reserve	$	158,000		$	204,000
Allowance for uncollectible accounts		32,000			24,000
Total	$	190,000		$	228,000
Net deferred tax asset-noncurrent (included in other assets):
Stock options and restricted stock	$	47,000		$	14,000
Amortization of intangible assets		49,000			—
Property, plant and equipment depreciation		52,000			99,000
Amortization of goodwill		(54,000	)		—
Total	$	94,000		$	113,000

Effective July 1, 2007, the Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” Adoption of FIN 48 requires the Company to review all open tax years in all tax jurisdictions to determine if there are any uncertain income tax positions that require recognition in the

F-15

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Company’s financial statements, including any penalties and interest, based on the “more-likely-than-not” criterion. Based on its review, the Company has concluded that there were no significant income tax positions that would require the providing of additional income taxes or the recognition of any tax benefit in the Company’s financial statements at June 30, 2008. There were no unallocated tax reserves at June 30, 2008. The Company’s policy is to record any interest and penalties as a component of income tax expense. The Company’s federal income tax returns for fiscal years prior to 2005 are no longer subject to examination by the Internal Revenue Service.

Note 9—Benefit Plan

The Company maintains a defined contribution retirement plan (the “Retirement Plan”) covering substantially all employees who satisfy the age and service requirements of the Retirement Plan. The Company’s contributions to the Retirement Plan are discretionary and for the years ended June 30, 2008, 2007 and 2006 amounted to $177,000, $142,000 and $119,000, respectively.

Note 10—Stock Options and Restricted Stock

Effective July 1, 2005, the Company adopted SFAS 123 (Revised 2004), “Share Based Payment” (“SFAS 123 (R)”). Accordingly, the Company recognizes compensation costs for all share-based payments granted subsequent to July 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123 (R).

The Company receives a tax deduction for certain stock option exercises when the options are exercised, generally for the excess of the fair market value over the exercise price of the option. In accordance with SFAS 123 (R), the Consolidated Statements of Cash Flows reports tax benefits from the exercise of stock options as financing cash flows.

All share amounts in the following paragraphs and table have been adjusted to reflect the 3-for-2 stock split paid on January 30, 2008 to shareholders of record on January 16, 2008.

The Bolt Technology Corporation Amended and Restated 2006 Stock Option and Restricted Stock Plan (the “Plan”) was approved by the Company’s stockholders at the November 20, 2007 Annual Meeting of Stockholders. The Plan amends and restates the Bolt Technology Corporation 2006 Stock Option Plan. The Plan provides that of the 750,000 shares of Common Stock that may be used for awards under the Plan, up to 225,000 shares of Common Stock may be used for restricted stock awards. Options granted to employees can become vested over, and can be exercisable for, a period of up to ten years. The Plan also provides that each non-employee director is granted options to purchase 7,500 shares of Common Stock on the date of his or her election to the Board of Directors. Each such option granted to a non-employee director has an option term of five years from the date of grant and is exercisable with respect to 25% of the shares covered under the option in each of the second through fifth years of its term. Under the terms of the Plan, no options can be granted subsequent to June 30, 2016.

The aggregate compensation expense for stock options, using the Black-Scholes option-pricing model, for outstanding grants under the Plan was $1,169,000 as of the option grant dates. This expense, which is a non-cash item, is being recognized in the Company’s financial statements over the four-year vesting period. During the fiscal year ended June 30, 2008, $157,000 of stock option compensation expense was recognized. Unrecognized compensation expense for stock options at June 30, 2008 amounted to $956,000 and is expected to be recognized over the next five years.

F-16

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

A summary of changes in stock options during the fiscal year ended June 30, 2008 is as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Fair Value at Grant Date		Weighted Average Contractual Life
Options outstanding at June 30, 2007	64,500		$	18.82		—	4.6 years
Granted	46,500		$	21.58	$	11.30	4.5 years
Exercised	—			—		—	—
Cancelled	(3,000	)	$	28.48		—	—
Options outstanding at June 30, 2008	108,000		$	19.74		—	4.4 years

During the fiscal year ended June 30, 2008, stock option grants were awarded in November 2007 (7,500 shares), January 2008 (15,750 shares) and June 2008 (23,250 shares). The fair value of options granted on these dates were $13.51, $9.43 and $11.85, respectively, as estimated on the dates of grant using the Black-Scholes option-pricing model with the following assumptions:

	Stock Option Grant Dates
	11/2007		01/2008		06/2008
Expected dividend yield	0	%	0	%	0	%
Expected stock price volatility	57	%	56	%	59	%
Risk-free interest rate	3.52	%	2.70	%	3.38	%
Expected life (years)	5		5		5

The aggregate intrinsic value (market price at June 30, 2008 less the weighted average exercise price) of outstanding stock options at June 30, 2008 was $306,000. The expiration dates for the outstanding options at June 30, 2008 are: 37,500 shares in November 2011, 24,000 shares in April 2012, 7,500 shares in November 2012, 15,750 shares in January 2013 and 23,250 shares in June 2013. Options outstanding at June 30, 2008, of which 15,375 shares were exercisable, consisted of 47,145 non-qualified and 60,855 qualified stock options.

The fair value of shares vested during fiscal year 2008 was approximately $352,000. No shares vested during fiscal years 2007 and 2006. The intrinsic value of options exercised during fiscal years 2007 and 2006 was approximately $5,279,000 and $1,269,000, respectively. No shares were exercised during fiscal year 2008. The weighted average exercise price of exercisable shares as of June 30, 2008 was $18.34; the aggregate intrinsic value of exercisable shares at June 30, 2008 was approximately $65,000; and the weighted average remaining contractual life of exercisable shares at June 30, 2008 was 3.6 years.

In January 2008, 36,750 shares of restricted stock were granted. These shares vest over a five year period and the cost to recipients is zero. These were the only restricted shares granted under the Plan during the fiscal year ended June 30, 2008. The aggregate compensation cost for restricted stock was $686,000 as of the grant date. This expense, which is a non-cash item, is being recognized in the Company’s financial statements over the five-year vesting period. During the fiscal year ended June 30, 2008, $57,000 of restricted stock compensation expense was recognized. Unrecognized compensation expense for restricted stock at June 30, 2008 amounted to $629,000.

F-17

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Note 11—Stockholders’ Equity

Changes in issued Common Stock and Stockholders’ Equity for each of the three years ended June 30, 2008, 2007 and 2006 were as follows:

	Common Stock					Retained Earnings (Accumulated Deficit)			Total
	Shares *		Amount
Balance June 30, 2005	8,135,940		$	26,176,000		$	(3,101,000	)	$	23,075,000
Exercise of stock options, net of 3,090 shares tendered for payment	205,089			412,000			—			412,000
Income from continuing operations	—			—			4,407,000			4,407,000
Income from discontinued operations	—			—			438,000			438,000
Balance June 30, 2006	8,341,029			26,588,000			1,744,000			28,332,000
Exercise of stock options, net of 8,715 shares tendered for payment	240,569			403,000			—			403,000
Stock based compensation expense	—			56,000			—			56,000
Tax benefit on stock options exercised	—			1,288,000			—			1,288,000
Income from continuing operations	—			—			9,999,000			9,999,000
Income from discontinued operations	—			—			608,000			608,000
Balance June 30, 2007	8,581,598			28,335,000			12,351,000			40,686,000
Restricted stock grants	36,750			—			—			—
Stock based compensation expense	—			214,000			—			214,000
Tax benefit on stock options exercised	—			53,000			—			53,000
Payment for fractional shares (3-for-2 stock split)	(255	)		(5,000	)		—			(5,000	)
Income from continuing operations	—			—			13,709,000			13,709,000
Income from discontinued operations	—			—			575,000			575,000
Gain on sale of discontinued operations	—			—			285,000			285,000
Balance June 30, 2008	8,618,093		$	28,597,000		$	26,920,000		$	55,517,000

* Adjusted for 3-for-2 stock split effective January 16, 2008.

Note 12—Commitments and Contingencies

Concentration of Credit Risk:

Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents and trade accounts receivable. The Company believes that the concentration of credit risk in its trade receivables is substantially mitigated by the Company’s ongoing credit evaluation and its short collection terms. The Company does not generally require collateral from its customers but, in certain cases, the Company does require the customer to provide a letter of credit or an advance payment. In limited cases, the Company will grant customers extended payment terms of up to 12 months. The Company establishes an allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers. Historically, the Company has not incurred significant credit related losses. The Company invests its excess cash in time deposits with maturities of less than three months in an effort to maintain safety and liquidity.

F-18

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Financial Instruments:

The Company does not hold or issue financial instruments for trading or hedging purposes, nor does it hold interest rate, leveraged, or other types of derivative financial instruments. Fair values of accounts receivable, accounts payable, accrued expenses and income taxes payable reflected in the June 30, 2008 and 2007 balance sheets approximate carrying values at those dates.

Lease Commitments:

The following table presents the Company’s future minimum lease payments as of June 30, 2008 relating to its non-cancelable operating leases with terms in excess of one year:

Years Ended June 30,	Amount
2009	$	348,000
2010		348,000
2011		348,000
2012		348,000
2013		174,000
Total	$	1,566,000

Under such operating leases, rent expense amounted to $418,000, $334,000 and $329,000 for the years ended June 30, 2008, 2007 and 2006, respectively.

The Company’s current leases for its Norwalk, Connecticut office and manufacturing facilities expire in 2013.

Employment Severance Agreements:

The Company has a severance compensation plan for two executive officers of the Company, other than the president, which becomes operative upon their termination if such termination occurs within 24 months subsequent to a change in ownership of the Company, as defined in the plan.

The Company also has employment agreements with its president and the president of a subsidiary which provide for severance in the case of voluntary or involuntary termination following a change in control. These employment agreements each have terms through June 30, 2011, subject to extension as set forth in the agreements.

The aggregate maximum potential severance liability under the above-mentioned agreements approximates $5,400,000 at June 30, 2008. No amounts were due as of that date because no events had occurred which would have triggered payments under the severance compensation plan or severance payments under the employment agreements.

Litigation:

From time to time, the Company is a party to routine litigation and proceedings that are considered part of the ordinary course of its business. The Company is not aware of any material current or pending litigation.

F-19

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Note 13—Segment and Customer Information

Since the sale of Custom effective May 31, 2008, the Company operates only in the oilfield services equipment business. Custom formerly operated in the “industrial products” segment and was the only operating unit in that segment. See Note 3 to Consolidated Financial Statements for additional information concerning discontinued operations.

The following table reports sales by country for the fiscal years ended June 30, 2008, 2007 and 2006 for continuing operations. Sales are attributed to each country based on the location of the customer. Total sales to all foreign countries for the fiscal years ended June 30, 2008, 2007 and 2006 were $49,544,000, $36,383,000 and $23,070,000, respectively.

	2008		2007		2006
Norway	$	21,160,000	$	15,790,000	$	6,969,000
United States		12,091,000		10,546,000		6,323,000
United Arab Emirates		10,761,000		7,801,000		6,068,000
Peoples Republic of China		4,294,000		2,227,000		2,486,000
France		3,886,000		2,967,000		2,118,000
Japan		3,117,000		496,000		613,000
United Kingdom		2,827,000		1,395,000		686,000
India		398,000		709,000		1,815,000
Other		3,101,000		4,998,000		2,315,000
	$	61,635,000	$	46,929,000	$	29,393,000

A relatively small number of customers has accounted for the Company’s sales. Customers accounting for 10% or more of consolidated sales for 2008, 2007 and 2006 are as follows:

	2008		2007		2006
Customer A	17	%	19	%	15	%
Customer B	15		10		22
Customer C	10		8		4
Customer D	7		10		4
Customer E	6		11		4

Note 14—Accrued Expenses

Accrued expenses at June 30, 2008 and 2007 consist of the following:

	2008		2007
Compensation and related taxes	$	1,243,000	$	1,479,000
Compensated absences		353,000		344,000
Commissions payable		427,000		454,000
RTS earnout payable		760,000		—
Other		262,000		288,000
	$	3,045,000	$	2,565,000

F-20

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Note 15—Credit Line

In May 2007, the Company entered into a $4,000,000 unsecured revolving credit facility with a bank to support general corporate purposes. The facility expires on May 31, 2010, and the Company has an option to extend the maturity date for one year periods. Borrowings bear interest based on LIBOR plus 1%. The unpaid principal is repayable on the earlier of an event of default or May 31, 2010, subject to extension. In addition, a commitment fee of 0.25% per year is payable based on the unused amount of the facility. The agreement requires, among other things, that the Company maintain certain financial covenants. During fiscal 2008 and 2007, there were no borrowings under this facility.

F-21

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

Note 16—Quarterly Results (unaudited)

The following table summarizes results for each of the four quarters in the fiscal years ended June 30, 2008 and 2007. This information differs from amounts previously reported on Form 10-Q filings for each of the six quarters ended September 30, 2006 through March 31, 2008 as a result of the restatements attributable to the sale of Custom Products Corporation (see Note 3 to Consolidated Financial Statements) and the 3-for-2 stock split (see Note 1 to Consolidated Financial Statements).

	Quarter Ended
2008	Sept. 30		Dec. 31		March 31		June 30
Sales	$	14,336,000	$	16,665,000	$	15,713,000	$	14,921,000
Gross profit		6,635,000		7,221,000		6,989,000		7,626,000
Income from continuing operations	$	3,295,000	$	3,503,000	$	3,219,000	$	3,692,000
Income from discontinued operations, net of taxes		160,000		97,000		185,000		133,000
Gain on sale of discontinued operations, net of taxes		—		—		—		285,000
Net income	$	3,455,000	$	3,600,000	$	3,404,000	$	4,110,000
Earnings per share—basic:
Income from continuing operations	$	0.38	$	0.41	$	0.38	$	0.43
Income from discontinued operations		0.02		0.01		0.02		0.02
Gain on sale of discontinued operations		—		—		—		0.03
Net income per share	$	0.40	$	0.42	$	0.40	$	0.48
Earnings per share—diluted:
Income from continuing operations	$	0.38	$	0.41	$	0.38	$	0.43
Income from discontinued operations		0.02		0.01		0.02		0.02
Gain on sale of discontinued operations		—		—		—		0.03
Net income per share	$	0.40	$	0.42	$	0.40	$	0.48
	Quarter Ended
2007	Sept. 30		Dec. 31		March 31		June 30
Sales	$	9,046,000	$	11,558,000	$	11,830,000	$	14,495,000
Gross profit		4,099,000		5,135,000		5,646,000		6,702,000
Income from continuing operations	$	1,793,000	$	2,309,000	$	2,686,000	$	3,211,000
Income from discontinued operations, net of taxes		209,000		61,000		159,000		179,000
Net income	$	2,002,000	$	2,370,000	$	2,845,000	$	3,390,000
Earnings per share—basic:
Income from continuing operations	$	0.22	$	0.27	$	0.32	$	0.38
Income from discontinued operations		0.02		0.01		0.02		0.02
Net income per share	$	0.24	$	0.28	$	0.34	$	0.40
Earnings per share—diluted:
Income from continuing operations	$	0.21	$	0.27	$	0.31	$	0.38
Income from discontinued operations		0.02		0.01		0.02		0.02
Net income per share	$	0.23	$	0.28	$	0.33	$	0.40

F-22

Bolt Technology Corporation and Subsidiaries

Schedule II—Valuation and Qualifying Accounts

For the Three Years Ended June 30, 2008

			Additions
Description	Balance At Beginning Of Year		Charged To Costs And Expenses			Charged To Other Accounts		Deductions			Balance At End Of Year
Allowance for uncollectible accounts:
2006	$	72,000	$	73,000		$	—	$	(52,000	)(a)	$	93,000
2007		93,000		98,000			—		(128,000	)(a)		63,000
2008		63,000		302,000			—		(284,000	)(a)		81,000
Reserve for inventory valuation:
2006	$	715,000	$	135,000		$	—	$	(345,000	)(b)	$	505,000
2007		505,000		19,000			—		—			524,000
2008		524,000		(118,000	)		—		—			406,000

(a) Accounts written-off.

(b) Inventory disposed of.

F-23

EXHIBIT INDEX

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).
3.2	Bylaws of the Registrant, amended and restated effective as of January 23, 2008 (incorporated by reference to Exhibit 3.1 to Form 8-K Current Report, SEC File No. 001-12075, dated January 23, 2008 and filed with the Commission on January 25, 2008).
10.1	Bolt Technology Corporation Amended and Restated 2006 Stock Option and Restricted Stock Plan together with (i) Form of Incentive Stock Option Agreement, (ii) Form of Nonqualified Stock Option Agreement, (iii) Form of Non-Employee Director Nonqualified Stock Option Agreement, and (iv) Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).†
10.2	Bolt Technology Corporation Amended and Restated Severance Compensation Plan together with Form of Designation of Participation (incorporated by reference to Exhibit 10.2 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).†
10.3	Lease Agreement dated January 10, 2003 between 381 Connecticut Avenue Corporation and Bolt Technology Corporation (incorporated by reference to Exhibit 10.6 to Form 10-K for the year ended June 30, 2003, SEC File No. 001-12075).
10.4	Lease Agreement dated January 10, 2003 between 381 Connecticut Avenue Corporation and Bolt Technology Corporation (incorporated by reference to Exhibit 10.7 to Form 10-K for the year ended June 30, 2003, SEC File No. 001-12075).
10.5	Employment Agreement between Bolt Technology Corporation and Raymond M. Soto effective as of June 10, 1996; Amendment to Employment Agreement between Bolt Technology Corporation and Raymond M. Soto effective as of September 20, 2001 (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2006, SEC File No. 001-12075); Amendment to Employment Agreement between Bolt Technology Corporation and Raymond M. Soto effective as of November 20, 2007 (incorporated by reference to Exhibit 10.3 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).†
10.6	Restricted Stock Award Agreement by and between Bolt Technology Corporation and Raymond M. Soto dated as of January 23, 2008 (incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended March 31, 2008, SEC File No. 001-12075).†
10.7	Employment Agreement between Custom Products Corporation and Gerald H. Shaff effective as of January 1, 2003 (incorporated by reference to Exhibit 10.5 to Form 10- K for the year ended June 30, 2003, SEC File No. 001-12075); Letter Agreement dated as of February 9, 2005 amending the Employment Agreement between Custom Products Corporation and Gerald H. Shaff, effective as of January 1, 2003 (incorporated by reference to Exhibit 10.8 to Form 10-Q for the quarter ended December 31, 2004, SEC File No. 001-12075).†
10.8	Employment Agreement between A-G Geophysical Products, Inc. and Michael C. Hedger, dated May 13, 2005 (incorporated by reference to Exhibit 10.10 to Form 10- Q for the quarter ended March 31, 2005, SEC File No. 001-12075); Amendment to Employment Agreement between A-G Geophysical Products, Inc. and Michael C. Hedger effective as of November 20, 2007 (incorporated by reference to Exhibit 10.4 to Form 8-K Current Report, SEC File No. 001-12075, dated November 20, 2007 and filed with the Commission on November 21, 2007).†

Exhibit No.	Description
10.9	Asset Purchase Agreement by and among Real Time Systems Inc., Embedded Microsystems, Inc. dba Real Time Systems, W. Allen Nance and Molly L. Nance dated July 10, 2007 (incorporated by reference to Exhibit 10.1 to Form 8-K Current Report, SEC File No. 001-12075, dated July 10, 2007 and filed with the Commission on July 12, 2007).
10.10	Employment Agreement by and between Real Time Systems Inc. and W. Allen Nance dated July 10, 2007 (incorporated by reference to Exhibit 10.2 to Form 8-K Current Report, SEC File No. 001-12075, dated July 10, 2007 and filed with the Commission on July 12, 2007).†
10.11	Non-Competition Agreement by and among Real Time Systems Inc., Bolt Technology Corporation, Embedded Microsystems, Inc. dba Real Time Systems and W. Allen Nance dated July 10, 2007 (incorporated by reference to Exhibit 10.3 to Form 8-K Current Report, SEC File No. 001-12075, dated July 10, 2007 and filed with the Commission on July 12, 2007).
10.12	Asset Purchase Agreement by and among Custom Products Corporation, Bolt Technology Corporation and A&A Manufacturing Co., Inc. dated May 6, 2008.*
21	Subsidiaries of the Registrant.*
23	Consent of Independent Registered Public Accounting Firm.*
31.1	Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*
31.2	Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*
99.1	Commercial Loan Agreement, dated as of May 30, 2007, by and among Webster Bank National Association, Bolt Technology Corporation, A-G Geophysical Products, Inc. and Custom Products Corporation (incorporated by reference to Exhibit 99.1 to Form 10-K for the year ended June 30, 2007, SEC File No. 001-12075).

* Filed herewith

† Management contract or compensatory plan

EX-10.12

Exhibit 10.12

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into this 6th day of May, 2008, by and among CUSTOM PRODUCTS CORPORATION, a Connecticut corporation (the “Seller”), BOLT TECHNOLOGY CORPORATION, a Connecticut corporation (the “Parent”), and A & A MANUFACTURING CO., INC., a Wisconsin corporation (the “Buyer”). Capitalized terms used, but not otherwise defined herein, shall have the meanings assigned to such terms in Article XII, below.

W I T N E S S E T H:

WHEREAS, the Seller is engaged in the business of manufacturing and selling precision miniature clutches, brakes, motors and other motion control devices (the “Subject Business”);

WHEREAS, the Seller and the Parent desire to sell the Subject Business and all of the assets owned, used or held by the Seller in connection with the Subject Business to the Buyer, and the Buyer desires to purchase the Subject Business and such assets from the Seller, all on the terms and subject to the conditions set forth herein; and

WHEREAS, the Parent holds all of the issued and outstanding capital stock of the Seller and the Parent will benefit financially from the transactions contemplated herein.

NOW, THEREFORE, the Seller, the Parent and the Buyer, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, do hereby promise and agree as follows:

ARTICLE I

Assets to be Purchased

1.1. Subject Assets. Subject to the terms and conditions set forth in this Agreement, the Seller agrees to sell to the Buyer and the Buyer agrees to purchase from the Seller at the Closing, free and clear of all Encumbrances other than the Permitted Encumbrances, all of the Seller’s right, title and interest in and to all of the assets owned, used or held by the Seller in connection with the Subject Business, including, without limitation, each of the following as the same exist on the Closing Date:

(a) All tangible assets of every kind and description, including, without limitation, all fixed assets, machinery, equipment, tools, tooling, molds, leasehold improvements, fixtures, furniture, furnishings, vehicles, computer hardware and software, data processing equipment and other items of a similar character, wherever located, including, without limitation, those items listed on Schedule 1.1(a) attached hereto;

(b) All inventories, wherever located, including, without limitation, all raw materials, work-in-process and finished goods and all such items in transit as of the Closing (collectively, the “Inventory”);

(c) All supplies, packaging materials, marketing and sales literature, advertising matter, consumable materials and other items of similar character;

(d) All books, records, manuals and other similar materials, wherever located and in whatever form they may be maintained, including, without limitation, all sales, account and customer records, personnel and payroll records, purchasing and sale records, vendor lists and related historical information, supplier, manufacturing and quality control records, price lists, correspondence and all research and development files (collectively, the “Records”);

(e) All credits, prepaid expenses, deferred charges, advance payments, security deposits and similar items (collectively, the “Prepaids”);

(f) Except for accounts receivable from the Parent, all accounts receivable, whether billed or unbilled (collectively, the “Accounts Receivable”);

(g) All logos, product specifications, blue-prints, drawings, formulae, patents and any applications therefor, trade names, trademarks, trademark registrations and any applications therefor, copyrights, copyright registrations and any applications therefor, whether issued or pending, including, without limitation, those items listed on Schedule 1.1(g) attached hereto and the names “Custom Products Corporation”, “Polyclutch”, “Polyvolt” and “Puljak” and any derivatives of any of the foregoing, and all inventions, improvements, secret processes, know-how, trade secrets and technical knowledge of the Subject Business;

(h) All backlog of customer orders;

(i) To the extent their transfer is permitted by applicable Law, all Governmental Approvals, and any applications therefor, held by the Seller or used in connection with the Subject Business;

(j) All telephone and facsimile numbers, email addresses, domain names and web sites, including, without limitation, all right, title and interest in and to “www.polyclutch.com” and “www.polyvolt.com”;

(k) All of the Seller’s right, title and interest in, to and under those Contracts set forth on Schedule 1.1(k) attached hereto (collectively, the “Assumed Contracts”), including, without limitation, any right to receive payment for products sold or services rendered by the Subject Business pursuant to the Assumed Contracts and to assert claims and to take other rightful actions in respect of breaches, defaults and other violations of the Assumed Contracts; and

(l) The goodwill, and all other intangible assets not previously referred to in this Paragraph 1.1, of the Subject Business.

All of the assets being purchased by the Buyer as described in this Paragraph 1.1 are hereinafter referred to as the “Subject Assets”.

2

1.2. Excluded Assets. Notwithstanding the provisions of Paragraph 1.1, above, the Subject Assets shall not include (i) all cash, cash equivalents and marketable securities of the Seller, (ii) the Seller’s corporate minute book and related corporate records, (iii) the general ledger and other accounting records of the Seller, provided, however, that the Subject Assets include software into which the general ledger is incorporated, and (iv) those other assets of the Seller set forth on Schedule 1.2 attached hereto (collectively, the “Excluded Assets”).

ARTICLE II

Purchase Price and Payment

2.1. Purchase Price. The purchase price for the Subject Assets (the “Purchase Price”) shall be an amount equal to the sum of (a) the Cash Purchase Price, subject to adjustment to the Cash Purchase Price after the Closing in the manner set forth in Paragraph 2.3, below, plus (b) the value as of the Closing Date of the Assumed Liabilities, subject to the adjustments stated in Article III, below. The Purchase Price shall be paid by (i) payment of the Cash Purchase Price in the manner set forth in Paragraphs 2.2(a) and 2.3, below, and (ii) assumption by the Buyer of the Assumed Liabilities in the manner set forth in Paragraph 2.2(b), below.

2.2. Payment of Purchase Price. At the Closing, the Buyer shall pay the Purchase Price by:

(a) Delivering to the Seller, by wire transfer of immediately available funds to an account designated in writing by the Seller prior to the Closing, the Cash Purchase Price; and

(b) Executing and delivering to the Seller, in accordance with Paragraph 4.3(c), below, the Assignment and Assumption Agreement.

2.3. Final Cash Purchase Price.

(a) The parties acknowledge and agree that the exact amounts of the Trade Accounts Payable Amount, the Current Asset Amount and the Capital Asset Amount will not be known as of the Closing Date and, as a result, the parties have agreed to consummate the transactions contemplated herein on the basis of a mutually agreed upon estimate of $40,011 for the Trade Accounts Payable Amount (the “Estimated Trade Accounts Payable Amount”), $1,196,951 for the Current Asset Amount (the “Estimated Current Asset Amount”) and $202,438 for the Capital Asset Amount (the “Estimated Capital Asset Amount”). The Estimated Current Asset Amount plus the Estimated Capital Asset Amount minus the Estimated Trade Accounts Payable Amount shall be the “Estimated Net Amount.” The parties further acknowledge and agree that the Cash Purchase Price may need to be adjusted subsequent to the Closing Date on the basis set forth in this Paragraph 2.3. Accordingly, within sixty (60) days following the Closing Date, the Buyer shall prepare and deliver to the Seller a reasonably detailed statement setting forth the Buyer’s calculation of the Trade Accounts Payable Amount, the Current Asset Amount and the Capital Asset Amount (the “Statement”), such calculation to be made on a basis consistent with that used by the Seller to determine the Estimated Net

3

Amount; provided, however, the Buyer shall have the right to base such calculation on a physical inventory of the Subject Assets. The Buyer’s determination of the Trade Accounts Payable Amount, the Current Asset Amount and the Capital Asset Amount shall be final, conclusive and binding upon the parties for all purposes unless, within thirty (30) days after receipt of the Statement, the Seller notifies the Buyer in writing (the “Dispute Notice”), setting forth in reasonable detail, any dispute with any item contained in the Statement. Any item or amount to which no dispute is raised in the Dispute Notice shall be final, conclusive and binding upon the parties for all purposes. If the Seller timely delivers a Dispute Notice, then the Seller and the Buyer shall attempt to resolve the disputed items. If the Buyer and the Seller are unable to resolve the disputed items within thirty (30) days after the Buyer’s receipt of the Dispute Notice, such disputed items shall be referred to BDO Seidman, LLP (the “Resolving Accounting Firm”); provided, however, that the scope of the engagement of the Resolving Accounting Firm shall be limited to the resolution of the disputed items described in the Dispute Notice, and the recalculation, if any, of the Trade Accounts Payable Amount, the Current Asset Amount and/or the Capital Asset Amount in light of such resolution. The determination of the Resolving Accounting Firm shall be made as promptly as possible and shall be final, conclusive and binding upon the parties for all purposes. The Seller and the Buyer shall each be permitted to submit such data and information to the Resolving Accounting Firm as each deems appropriate. The Seller and the Buyer shall cooperate, and shall cause their respective representatives to cooperate, fully with the Resolving Accounting Firm and its representatives in connection with any engagement of the Resolving Accounting Firm hereunder, including, without limitation, by signing the engagement or retainer letter, if any, reasonably requested by the Resolving Accounting Firm. The Buyer and the Seller shall each bear one half of the expenses and fees incurred by the Resolving Accounting Firm in discharging its duties hereunder.

(b) Once the final Trade Accounts Payable Amount, Current Asset Amount and Capital Asset Amount are determined in accordance with this Paragraph 2.3, then the final Current Asset Amount plus the final Capital Asset Amount minus the final Trade Accounts Payable Amount shall be calculated as the “Final Net Amount,” and if the Final Net Amount is less than the Estimated Net Amount, the Seller shall pay to the Buyer, within five (5) business days following the determination of the Final Net Amount under this Paragraph 2.3, the amount of such difference, by delivery of immediately available funds to the Buyer.

2.4. Allocation of Purchase Price. The parties hereto agree to allocate the Purchase Price, as finally adjusted under Paragraph 2.3, above, among the Subject Assets in accordance with the allocation schedule set forth on Schedule 2.4 attached hereto. The parties hereto agree to report all Tax consequences of the transactions contemplated by this Agreement and make all required submissions to Governmental Bodies in a manner consistent with such allocation schedule.

4

ARTICLE III

Assumption of Liabilities

As partial consideration for the Subject Assets, the Buyer shall assume all obligations under and satisfy as the same shall become due (i) all of the liabilities and obligations of the Seller which accrue after the Closing Date under the Assumed Contracts, (ii) except for accounts payable to the Parent, the Seller’s trade accounts payable as of or after the Closing Date, (iii) all liabilities to fulfill outstanding customer orders of the Subject Business, (iv) all liabilities to customers of the Subject Business arising under written warranty agreements, (v) all liabilities to employees of the Subject Business arising under the Seller’s vacation policies and practices, (vi) all accrued commissions relating to the sales representative agreements which are Assumed Contracts and which are identified in Sections 3 and 5 of Schedule 1.1(k), and (vii) accrued Taxes relating to the Leased Real Property (collectively, the “Assumed Liabilities”); provided, however, (A) with respect to the vacation accrual liabilities identified in clause (v), above, a corresponding adjustment to the Purchase Price shall be made to reflect the Buyer’s assumption of such liabilities, (B) with respect to the commission accrual liabilities identified in clause (vi), above, a corresponding adjustment to the Purchase Price shall be made to reflect the Buyer’s assumption of such liabilities, and (C) with respect to the accrued Taxes identified in clause (vii), above, a credit against the Purchase Price shall be made to reflect the Buyer’s assumption of such liability. Except for the Assumed Liabilities, the Buyer shall not be obligated under, nor shall the Buyer assume or be or become liable for, any obligation, Contract, Environmental Claim, debt, liability, cost or expense of or relating to the Seller, the Parent, the Subject Business or any of the Excluded Assets the basis for which exists on or before the Closing Date (collectively, the “Excluded Liabilities”). The Seller and the Parent jointly and severally covenant and agree to pay and discharge when due all of the Excluded Liabilities.

ARTICLE IV

Closing

4.1. Time and Place of Closing. The Closing shall be held at such place as the parties shall mutually agree on June 2, 2008, to be effective as of May 31, 2008 (May 31, 2008 to be the “Closing Date”) or on such other date as the parties shall mutually agree; provided, however, the parties agree that the Closing may be consummated by facsimile or electronic transmission or through the use of mail or overnight delivery service.

4.2. Conditions Precedent to Buyer’s Obligation. The obligation of the Buyer to consummate the transactions contemplated by this Agreement is subject to the satisfaction as of the Closing of each of the following conditions:

(a) Subject to the provisions of Article VIII, below, the respective warranties and representations of the Seller and the Parent made in this Agreement shall be true and correct in all respects as of the date hereof and on and as of the Closing Date as though made on and as of the Closing Date; the Seller and the Parent shall have performed in all respects the respective covenants of the Seller and the Parent contained in this Agreement required to be performed on or prior to the Closing Date; and the Seller and the Parent

5

shall have delivered to the Buyer a certificate dated the Closing Date and signed by a duly authorized representative of the Seller and a duly authorized representative of the Parent confirming the foregoing (the “Seller’s Bring-Down Certificate”).

(b) The Consents and Governmental Approvals listed on Schedule 4.2(b) attached hereto, each in a form reasonably satisfactory to the Buyer, shall have been received by the Buyer on or before the Closing. The Buyer, the Seller and the Parent agree to cooperate with each other in connection with obtaining such Consents and Governmental Approvals.

(c) No Proceeding shall have been instituted or threatened which seeks to enjoin, restrain or prohibit, or which questions the validity or legality of, any of the transactions contemplated by this Agreement or which otherwise seeks to affect or could affect any of the transactions contemplated hereby or impose Losses upon any party hereto if any such transactions are consummated.

(d) An employment agreement between the Buyer and each of Gerald Shaff, Elizabeth Bacon and Philip Bacon, each in a form reasonably satisfactory to the Buyer (the “Employment Agreements”), duly executed by Gerald Shaff, Elizabeth Bacon and Philip Bacon, shall have been received by the Buyer on or before the Closing.

(e) The Seller or the Parent, as the case may be, shall have delivered to the Buyer each of the following:

(i) A bill of sale, certificate of title and such other instruments of conveyance requested by the Buyer, each in a form reasonably satisfactory to the Buyer, duly executed by the Seller;

(ii) Possession and control of the Subject Assets, free and clear of all Encumbrances other than the Permitted Encumbrances;

(iii) An assignment of the lease between Walter H. Bacon and the Seller for the North Haven, Connecticut real property and improvements located thereon occupied and used by the Seller, in form and substance acceptable to the Buyer, duly executed by the Seller;

(iv) An assignment and assumption agreement, in form and substance acceptable to the Buyer (the “Assignment and Assumption Agreement”), duly executed by the Seller;

(v) A certificate from the corporate Secretary or other duly authorized officer of the Seller, in a form reasonably satisfactory to the Buyer, setting forth resolutions of the Parent and the Board of Directors of the Seller, authorizing the execution, delivery and performance by the Seller of this Agreement and the Seller Ancillary Documents, and the taking by the Seller of any and all actions deemed necessary or advisable to consummate the transactions contemplated hereby and thereby;

6

(vi) A copy of the Seller’s Articles of Incorporation, as amended, certified by the Connecticut Secretary of State no earlier than ten (10) business days prior to the Closing Date;

(vii) A good standing certificate for the Seller issued by the Connecticut Secretary of State no earlier than ten (10) business days prior to the Closing Date;

(viii) With regard to the Leased Real Property, the appropriate property transfer form (i.e., Form I, II, III or IV) and requisite accompanying documentation as specified in Connecticut General Statutes Section 22a-134a (the “Property Transfer Act”) which has been signed by the Seller and which identifies the Seller as the “certifying party” within the meaning of the Property Transfer Act shall be provided to the Buyer and shall also have been submitted to the Connecticut Department of Environmental Protection;

(ix) A patent assignment, in form and substance acceptable to the Buyer (the “Patent Assignment”), duly executed by the Seller;

(x) A trademark assignment, in form and substance acceptable to the Buyer (the “Trademark Assignment”), duly executed by the Seller;

(xi) An agreement on the terms set forth on Schedule 4.2(xi) and otherwise reasonably acceptable to the Parent and the Buyer (the “Services Agreement”), duly executed by the Parent pursuant to which the Buyer may purchase from the Parent machining and assembly services for up to six months after the Closing with respect to the “Puljak” product currently produced and sold by the Seller; and

(xii) Appropriate executed originals of an amendment to the Seller’s Articles of Incorporation changing the Seller’s legal name from “Custom Products Corporation” to a name which is substantially different therefrom and not deceptively similar thereto; provided, that such executed documents shall be in such number and in such form as is required for effective filing with the Connecticut Secretary of State; provided, further, that the Seller shall also pay any filing or recording fees necessary for the effective filing of such documents with the Connecticut Secretary of State.

If any of the foregoing conditions to the Closing shall not have been satisfied on or prior to the Closing, the Buyer may elect to (i) terminate this Agreement pursuant to Paragraph 11.1(a), below, or (ii) waive any such unsatisfied condition and consummate the transactions contemplated by this Agreement despite such failure.

4.3. Conditions Precedent to Seller’s and Parent’s Obligations. The obligations of the Seller and the Parent to consummate the transactions contemplated by this Agreement is subject to the satisfaction as of the Closing of each of the following conditions:

(a) The warranties and representations of the Buyer made in this Agreement shall be true and correct in all respects as of the date hereof and on and as of the Closing

7

Date as though made on and as of the Closing Date; the Buyer shall have performed in all respects the covenants of the Buyer contained in this Agreement required to be performed on or prior to the Closing Date; and the Buyer shall have delivered to the Seller a certificate dated the Closing Date and signed by a duly authorized representative of the Buyer confirming the foregoing (the “Buyer’s Bring-Down Certificate”).

(b) No Proceeding shall have been instituted or threatened which seeks to enjoin, restrain or prohibit, or which questions the validity or legality of, any of the transactions contemplated by this Agreement or which otherwise seeks to affect or could affect any of the transactions contemplated hereby or impose Losses upon any party hereto if any such transactions are consummated.

(c) The Buyer shall have delivered to the Seller each of the following:

(i) The Cash Purchase Price, in the manner described in Paragraph 2.2(a), above;

(ii) The Buyer’s Bring-Down Certificate, duly executed by an authorized representative of the Buyer;

(iii) The Employment Agreements, duly executed by the Buyer;

(iv) The Assignment and Assumption Agreement, duly executed by the Buyer;

(v) A certificate of status for the Buyer issued by the Wisconsin Department of Financial Institutions no earlier than ten (10) business days prior to the Closing Date;

(vi) The Patent Assignment, duly executed by the Buyer;

(vii) The Trademark Assignment, duly executed by the Buyer; and

(viii) The Services Agreement, duly executed by the Buyer.

If any of the foregoing conditions to the Closing shall not have been satisfied on or prior to the Closing, the Seller and the Parent may elect to (i) terminate this Agreement pursuant to Paragraph 11.1(b), below, or (ii) waive any such unsatisfied condition and consummate the transactions contemplated by this Agreement despite such failure.

ARTICLE V

Joint and Several Warranties and Representations of Seller and Parent

5.1. Joint and Several Warranties and Representations. Except as set forth in the disclosure schedule attached hereto (the “Disclosure Schedule”), the Seller and the Parent hereby jointly and severally warrant and represent to the Buyer, which warranties and representations shall survive the Closing Date for the periods set forth in Paragraph 5.2, below, as follows:

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5.1.1. Corporate Matters. The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Connecticut. The Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Connecticut. The Seller has the corporate power and authority to own or lease its properties and assets, including, without limitation, the Subject Assets, and to carry on all business activities now conducted by the Seller, including, without limitation, the Subject Business. The Seller is duly qualified and in good standing (or comparable status) in each jurisdiction in which the nature of the Subject Business or the ownership, leasing or holding of the Subject Assets is such that a failure to qualify would have a Material Adverse Effect. Attached to the Disclosure Schedule is a true, correct and complete list of all states in which the Seller is qualified to do business as a foreign corporation.

5.1.2. Capitalization. The Parent holds all of the issued and outstanding capital stock of the Seller of whatever class, series or designation. There are no outstanding options, warrants, subscriptions, convertible or exchangeable securities or other agreements pursuant to which the Seller is obligated to issue, sell, purchase, retire or redeem any shares of its capital stock.

5.1.3. Authority. Each of the Seller and the Parent has the corporate power and authority to enter into this Agreement and the Seller Ancillary Documents to which it is a party, and to consummate the transactions contemplated hereby or thereby. The execution, delivery and performance by the Seller and the Parent of this Agreement and the Seller Ancillary Documents to which it is a party have been approved by the Parent and the Board of Directors of the Seller and in accordance with all other necessary corporate action. This Agreement and the Seller Ancillary Documents to which the Seller or the Parent is a party are and shall constitute the valid and legally binding obligations of the Seller and the Parent, enforceable against each of them in accordance with their respective terms.

5.1.4. No Conflict. The execution and delivery of this Agreement and the Seller Ancillary Documents by the Seller and the Parent do not, and the consummation of the transactions contemplated hereby or thereby and compliance with the terms hereof or thereof by the Seller and the Parent will not (a) conflict with or result in any breach or violation of (i) any provision of the Articles of Incorporation of the Seller, the Articles of Incorporation of the Parent, the By-Laws of the Seller, the By-Laws of the Parent, or any other constituent or governing agreement, instrument or document of the Seller or the Parent, or (ii) any Law or Order applicable to the Seller, the Parent, the Subject Business or any of the Subject Assets, or (b) violate or conflict with, or result in a breach or default under, or result in the imposition of any Encumbrance upon any of the Subject Assets pursuant to, or require a consent, notice or waiver under the provisions of or result in the acceleration of any of the provisions of, any Assumed Contract to which the Seller or the Parent is a party or is subject or which affects the Subject Business or any of the Subject Assets. No Governmental Approval from, or registration, declaration or filing by the Seller or the Parent with, any Governmental Body or other third Person (except to the extent necessitated by the nature of the Buyer’s affiliates or business) is required to be obtained or made by the Seller or the Parent in connection with such party’s execution and delivery of this Agreement and the Seller Ancillary Documents to which the Seller or the Parent is a party or the consummation or performance by such party of any of the transactions contemplated hereby or thereby.

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5.1.5. Documentation. The Records are true, correct and complete and have been maintained in all material respects in accordance with sound business practices.

5.1.6. Title To and Condition of Subject Assets. The Seller has good and marketable title to all of the Subject Assets, tangible and intangible, free and clear of all Encumbrances whatsoever, other than those Encumbrances set forth on the Disclosure Schedule (collectively, the “Permitted Encumbrances”). The Disclosure Schedule lists the location of all Subject Assets, including all of the Inventory and the Records. The Subject Assets constitute all of the assets owned by the Seller and/or used in the Subject Business, except for the Excluded Assets. All of the tangible personal property included in the Subject Assets is: (i) taking into account the age of the tangible personal property, in good operating condition, working order and repair and with no defects, ordinary wear and tear excepted; (ii) maintained in accordance with sound maintenance practices; and (iii) in the Seller’s possession or control. The Subject Assets are sufficient for the operation of the Subject Business in the Ordinary Course of Business based on current levels of operation. To the Seller’s Knowledge, the condition of the Subject Assets conforms in all material respects with all applicable Laws. There is no Contract, including any option, right of first refusal or other right of any Person, binding upon or which at any time in the future may become binding upon the Seller or the Parent to sell, transfer, assign, pledge, bequeath, charge, mortgage or in any other way dispose of or subject to any other Encumbrance any of the Subject Assets, other than as contemplated by this Agreement and the Ancillary Documents. Any leased personal property included within the Subject Assets is in the condition required of such property by the terms of the lease applicable thereto. Except for the Seller’s interest and the Parent’s ownership interest in the Seller, neither the Parent nor any Affiliate of the Seller or the Parent has or has had any interest in any right, property or asset owned, used or required by the Seller in the operation of the Subject Business, including any of the Subject Assets.

5.1.7. Inventory. The amount of Inventory on hand: (i) is sufficient for the operation of the Subject Business in the Ordinary Course of Business based on current levels of operation; (ii) has been purchased in the Ordinary Course of Business consistent in quantity and quality with past practices of the Subject Business; and (iii) with respect to Inventory on hand that is reflected on the Seller’s most recent Financial Statements, such Inventory is not obsolete and is of a quality and quantity usable and salable in the Ordinary Course of Business. No write-down of Inventory has been made during the past three (3) years.

5.1.8. Accounts Receivable. The Accounts Receivable arose from bona fide transactions in the Ordinary Course of Business and, to the Seller’s Knowledge, are good and collectible within three (3) months after the Closing Date in the Ordinary Course of Business at the aggregate recorded amount thereof, subject to customary trade discounts and to the reserves, if any, for slow or uncollectible accounts set forth on the Seller’s most recent monthly Financial Statements. All Accounts Receivable arose from transactions for which the Seller has genuine invoices, shipping documents or an otherwise valid and legally binding Contract of the obligor named therein and reflect a binding and unconditional obligation of such obligor to pay on the date specified therein. To the Seller’s Knowledge, there is no contest, claim or right of set-off, other than returns made in the Ordinary Course of Business, relating to the amount or validity of any Accounts Receivable.

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5.1.9. Real Property.

(a) The Disclosure Schedule contains a true, correct and complete list and description of all real property leased by the Seller (collectively, the “Leased Real Property”), indicating the Person(s) from whom such Leased Real Property is currently being leased.

(b) The Seller’s use and occupancy of the Leased Real Property is not in violation of any Law, Order or Governmental Approval applicable thereto in such a way that could result in a Material Adverse Effect.

(c) The Disclosure Schedule lists each Real Property Lease. Each Real Property Lease is in full force and effect and is the valid and legally binding obligation of the Seller and, to the Seller’s Knowledge, the other parties named therein. No Real Property Lease has been amended, supplemented, modified, assigned, encumbered, terminated or cancelled as of the date hereof. Neither the Seller nor, to the Seller’s Knowledge, any other party to a Real Property Lease, has breached or is in default under such Real Property Lease and no notice of breach or default under such Real Property Lease has been given or received by the Seller or the Parent. No condition exists which, but for the giving of notice, the passage of time, or both, would constitute a default under any Real Property Lease.

5.1.10. Proceedings; Orders. There is no Proceeding pending or, to the Seller’s Knowledge, threatened against the Seller or the Parent with respect to the Subject Assets and/or the Subject Business. To the Seller’s Knowledge, no event has occurred or circumstances exist that may give rise or serve as a basis for the commencement of any such Proceeding. Neither the Seller nor the Parent is subject to any Order which would limit or restrict such party’s right to enter into and carry out this Agreement or any of the Seller Ancillary Documents to which the Seller or the Parent is a party or to consummate or perform the transactions contemplated hereby or thereby or which would otherwise adversely affect the Subject Business or any of the Subject Assets.

5.1.11. Intellectual Property.

(a) The Disclosure Schedule lists: (i) all United States of America (“U.S.”) and foreign issued design patents and utility patents, and all pending applications relating to any inventions, and all reissues, divisions, continuations-in-part and extensions of them; (ii) all registered trademarks, registered service marks, trademark and service mark applications, together with all unregistered trademarks and service marks, trade names, trade dress, logos and designs which are material to the Subject Business; and (iii) all registered U.S. copyrights and copyright applications and all renewals and extensions owned by the Seller or used in the Subject Business or in which the Seller has an interest and the nature of such interest (items (i) through (iii), above, shall be collectively referred to hereinafter as “Intellectual Property”). The Seller has delivered to the Buyer true, correct and complete copies of all written documentation evidencing ownership and prosecution (if applicable) of each item of Intellectual Property.

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(b) The Disclosure Schedule lists: (i) all Contracts granted by the Seller or the Parent which create rights in any third Person regarding any item of Intellectual Property (other than licenses or rights to use granted to customers as part of the Seller’s standard terms of sale in the Ordinary Course of Business); and (ii) all Contracts granted to the Seller which create rights in the Seller regarding any intellectual property owned by any third Person, including, without limitation, trademarks, patents, copyrights, trade secrets and know-how, other than “off the shelf” software and similar licenses (hereinafter collectively referred to as “Licenses”).

(c) (i) The Seller is the sole and exclusive owner, free and clear of all Encumbrances other than the Permitted Encumbrances, of all right, title and interest in each item of Intellectual Property and the Seller has the absolute right to use and assign those rights without seeking the approval or consent of any third Person, without providing notice to any third Person, and without making any payment or providing other consideration to any third Person; (ii) each registration and application for each item of Intellectual Property is in full force and effect; (iii) except for trade secrets and know-how and other assets included in the Subject Assets, there are no other items of intellectual property that are owned by the Seller or material to the Subject Business; (iv) there are no claims addressed to the Seller or the Parent or pending Proceedings or, to the Seller’s Knowledge, threatened claims by any Person relating to the use by the Seller of any item of Intellectual Property or challenging the Seller’s ownership of the same; (v) no item of Intellectual Property is subject to any Order or Contract limiting the scope or use of such Intellectual Property or declaring any of such Intellectual Property abandoned; (vi) to the Seller’s Knowledge, there are no infringing or diluting uses of any item of Intellectual Property and no Proceedings are pending or, to the Seller’s Knowledge, threatened concerning the possibility of any such infringing or diluting use; and (vii) except for Licenses, neither the Seller nor the Parent has granted any Contract or other right to any third Person to use any item of Intellectual Property.

(d) To the Seller’s Knowledge, the Seller has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any intellectual property rights of third Persons and neither the Seller nor the Parent has received any charge, complaint, claim, or notice alleging any such interference, infringement, misappropriation or violation.

5.1.12. Financial Statements. The Financial Statements attached to the Disclosure Schedule are true, correct and complete and fairly represent the financial condition of the Subject Business on the dates designated therein and the results of operations for the periods designated therein and were prepared in accordance with GAAP (except for federal and state Taxes based on income) subject to inter-company adjustments and, in the case of interim financial statements, to appropriate year-end adjustments and the absence of footnotes. There has been no Material Adverse Effect since June 30, 2007.

5.1.13. Taxes. All Tax Returns, reports and forms required to be filed on or prior to the date hereof have been timely filed and accurately reflect the Tax liability of the Seller. As of the date hereof, no currently outstanding extensions of time within which to file any Tax Return have been requested by the Seller and no deadline for filing any such Tax Return has been

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extended or waived. All Taxes and withholding amounts due and payable on or prior to the date hereof (whether or not reflected on any Tax Return) have been paid in full on or prior to the date hereof. No Tax deficiencies have been proposed or assessed against the Seller. There are no pending or, to Seller’s Knowledge, threatened Proceedings for or relating to any liability in respect of Taxes and there are no matters under discussion with any Governmental Body or arbitrator with respect to Taxes that are likely to result in an obligation by the Seller to pay any additional amount of Taxes. No Encumbrances relating to Taxes (other than for current Taxes not yet due and payable) have been filed against the Seller. The Seller has made, or will make as of the Closing, all filings necessary to make the transactions contemplated by this Agreement exempt from sales, document, transfer or similar Taxes and in the event that any such Tax arises as a result of any of such transactions, the Seller shall promptly pay such Taxes.

5.1.14. Undisclosed Commitments or Liabilities. There are no commitments, liabilities or obligations relating to the Seller or the Subject Business, whether accrued, absolute, contingent or otherwise, for which adequate provisions have not been made on the Financial Statements, except those commitments, liabilities or obligations incurred in or as a result of the Ordinary Course of Business since June 30, 2007 (none of which ordinary course commitments, liabilities or obligations have had or could have a Material Adverse Effect).

5.1.15. Contracts; Assumed Contracts. The Disclosure Schedule sets forth a true, correct and complete list of all of the following with respect to which the Seller is a party or by which the Seller, the Subject Business or the Subject Assets is bound: (i) all purchase and sales orders not in the Ordinary Course of Business and all purchase and sales orders in excess of $10,000 existing as of the date hereof; (ii) all arrangements or agreements, whether written or oral, between the Seller and the Parent or any Affiliate of the Parent; (iii) loan agreements, supply agreements, sole source arrangements, security agreements, notes, guarantees, mortgages, licenses, technology agreements, royalty agreements, licensing agreements, construction permits, leases, employment agreements, compensation agreements, covenants not to compete, confidentiality agreements, commission agreements, sales representative, distributorship or marketing agreements, employee benefit plans, profit sharing plans, group insurance, bonus plans or other Contracts (excluding purchase and sales orders if already disclosed pursuant to clause (i), above) made in the Ordinary Course of Business for an amount greater than $10,000 or with a term extending more than sixty (60) days from the date hereof; and (iv) all other Contracts not made in the Ordinary Course of Business. True, correct and complete copies (or memoranda describing each with respect to oral Contracts) of each Contract set forth on the Disclosure Schedule, and all amendments and modifications thereto and supplements thereof, have been delivered to the Buyer prior to the date hereof. Except for the Assumed Contracts and the Assumed Liabilities, the Buyer shall not assume and shall have no right under or liability or obligation for or in respect of, any other Contract which relates to the Seller, the Subject Business or any of the Subject Assets. Each Assumed Contract is and will continue to be immediately after the Closing valid, binding and in full force and effect in accordance with its terms as against the Seller and, to the Seller’s Knowledge, as against the other party thereto. Neither the Seller nor, to the Seller’s Knowledge, any other party to an Assumed Contract has breached or is in default under such Assumed Contract (with or without the lapse of time, the giving of notice, or both). Neither the Seller nor the Parent has given or received any notice or other communication regarding any actual, alleged or potential violation or breach of, or default under, any Assumed Contract or any termination or potential termination thereof and there are no

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present renegotiations of or attempts to renegotiate any amounts paid or payable under any Assumed Contract. No Assumed Contract has been amended, modified or supplemented (whether orally or in writing) from its original terms. Except as set forth on the Disclosure Schedule, each Assumed Contract is assignable by the Seller to the Buyer at the Closing without obtaining any consent or waiver from, or providing any notice to, any third Person and without causing the acceleration of any provision under such Assumed Contract.

5.1.16. Products. No claim for product liability has been asserted against the Seller with respect to the Subject Business during the five (5) year period immediately preceding the date hereof and, to the Seller’s Knowledge, no event has occurred or circumstance exists which may give rise to the assertion of any such claim. To the Seller’s Knowledge, there is no deficiency or inadequacy in the design, manufacture or labeling of any of the products of the Subject Business which may result in any product liability claim. All products sold by the Subject Business have been designed, manufactured and labeled in compliance with all applicable Laws and manufacturing, quality control and labeling standards and procedures. There have been no recalls with respect to products sold by the Seller.

5.1.17. Product and Service Warranties. All products sold and services provided by the Subject Business (and, as applicable, the delivery thereof) prior to the date hereof have been sold or provided, as the case may be, in conformity with all applicable contractual commitments and all expressed or implied warranties. No liability or other obligation or damages, including any obligation to repair or replace, in respect of any warranty claim exists in connection with the products sold or services provided by the Subject Business, except for any such claims incurred in the Ordinary Course of Business consistent in amount and character with past experience of the Subject Business. There are no standard terms and conditions and purchase and sale orders used in connection with the Subject Business (including warranty provisions).

5.1.18. Employees. The Disclosure Schedule contains:

(a) A list of all employee handbooks and/or manuals relating to the employees of the Seller, true, correct and complete copies of which have been delivered to the Buyer; and

(b) A list of all employees of the Seller, together with their job descriptions, rates of salary, wages or commissions, vacation benefits and accrual rates, and each bonus, deferred compensation, incentive compensation, severance or termination pay agreement or employment benefit applicable to each such employee.

5.1.19. Labor Practices. With respect to the employees of the Seller:

(a) To the Seller’s Knowledge, the Seller is in compliance with all applicable Laws relating to employment discrimination, employee welfare and labor standards, including, without limitation, the Federal Fair Labor Standards Act and the rules and regulations promulgated thereunder, each as amended to date. There is no basis for any claim by any past or present employee of the Seller that such employee was subject to a wrongful discharge or any employment discrimination by the Seller or its management

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arising out of or relating to such employee’s race, sex, age, religion, national origin, ethnicity, handicap or any other protected characteristic under applicable Law.

(b) To the Seller’s Knowledge, the Seller is in compliance with all applicable Laws relating to the safety of employees or the workplace or relating to the employment of labor, including, without limitation, the Federal Occupational Safety and Health Act and the rules and regulations promulgated thereunder, each as amended to date, and any provisions of such Laws relating to wages, bonuses, collective bargaining, equal pay and the payment of social security, payroll and similar Taxes. No Proceedings are pending or, to the Seller’s Knowledge, threatened, before any Governmental Body or arbitrator relating to labor or employment matters.

(c) The Seller is not a party to any Contract with any union, labor organization, employee group, or other Person which affects the employment of employees of the Seller, including, without limitation, any collective bargaining agreements or labor contracts.

(d) To the Seller’s Knowledge, none of the employees of the Seller are in the process of being organized by or into labor unions or associations. The Seller has not been subject to a strike, slowdown or other work stoppage during the five (5) year period immediately preceding the date hereof and, to the Seller’s Knowledge, there are no strikes, slow-downs or other work stoppages threatened against the Seller.

(e) To the Seller’s Knowledge, no key employee or group of employees has expressed plans to terminate employment with the Seller prior to the date hereof or to not accept an offer of employment, if any were to be offered, with the Buyer.

5.1.20. Plans; ERISA.

(a) The Disclosure Schedule lists all of the Seller’s bonus, deferred or incentive compensation, profit sharing, retirement, vacation, sick leave, hospitalization, health, cafeteria, insurance, disability, stock option, severance plans and policies, employment policies and all “employee pension benefit plans” (as defined in Section 3(2) of ERISA) or “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) (individually, a “Plan” and collectively, the “Plans”) that are or have been sponsored or contributed to by the Seller, or by any trade or business which is or has been treated as a single employer with the Seller under Sections 414(b), (c), (m) or (o) of the Code (an “ERISA Affiliate”), for the benefit of an employee or former employee of the Seller or any ERISA Affiliate.

(b) Each such Plan is in material compliance with, and has been administered in accordance with, the provisions of ERISA and the Code applicable to such Plan and all other applicable Laws. The Seller has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each such Plan and no accumulated funding deficiency exists with respect to each such Plan. All contributions required to be made with respect to all Plans on or prior to the date hereof have been timely made. None of the Seller, any ERISA Affiliate, any Plan, or, to Seller’s

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Knowledge, any trust or trustee or administrator thereof has (i) engaged in any transaction prohibited by ERISA or the Code, (ii) breached any fiduciary duty owed by it with respect to the Plans described above, or (iii) failed to file and distribute in a timely manner all reports and information required to be filed or distributed in accordance with ERISA.

(c) Neither the Seller nor any ERISA Affiliate has ever maintained, sponsored, participated in or contributed to, or been obligated to contribute to, nor does the Seller or any such ERISA Affiliate have any liability with respect to, any “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. Neither the Seller nor any ERISA Affiliate has ever contributed to, nor does the Seller or any such ERISA Affiliate have any actual or potential liability with respect to, any “multiemployer pension plan” (within the meaning of Section 3(37) of ERISA).

(d) The Seller has provided to the Buyer, or presented to the Buyer’s representatives for their review, true, correct and complete copies of all available documents pursuant to which the Plans are maintained and administered and the most recent applicable annual reports.

(e) No Plan is currently under audit or review by any Governmental Body and, to the Seller’s Knowledge, no such audit or review is threatened. No Proceedings are pending or, to the Seller’s Knowledge, threatened against any Plan.

5.1.21. Events Since June 30, 2007. Since June 30, 2007, the Seller has not suffered any event which has had or would result in a Material Adverse Effect or taken any action outside of the Ordinary Course of Business. Without limiting the general applicability of the foregoing, since June 30, 2007, the Seller has:

(a) Used, preserved and maintained the Subject Assets, individually and in the aggregate, on a basis consistent with past practices;

(b) Maintained all insurance and bonds covering the Seller, the Subject Business or the Subject Assets (including the insurance policies attached to the Disclosure Schedule) in full force and effect;

(c) Continued to purchase raw materials and supplies in accordance with current production schedules for the Subject Business and in quantities and qualities consistent with past practices of the Seller and not in excess of the reasonable requirements of the Subject Business;

(d) Paid all debts and obligations incurred by the Seller in the operation of the Subject Business as the same became due and payable, except to the extent the Seller has contested such debts or obligations in good faith by appropriate Proceedings and has established appropriate reserves therefor; and

(e) Maintained its Records in the usual manner and on a basis consistent with past practices.

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Furthermore, from June 30, 2007 to the date hereof, the Seller has not, other than in the Ordinary Course of Business:

(a) Subjected to any Encumbrance any of the Subject Assets;

(b) Sold, transferred, leased or otherwise disposed of any of the Subject Assets;

(c) Suffered any damage, destruction or loss (whether or not covered by insurance) in any single instance in excess of $10,000 or, in the aggregate with other such instances, in excess of $25,000;

(d) Had any material change in its accounting principles, methods or practices, except insofar as may be required by a generally applicable change in GAAP;

(e) Had any material change in the relationship or course of dealing with any party to an Assumed Contract;

(f) Committed any act or omitted to do any act, or permitted any act or omission to act, which has caused or may cause a breach or default under any Assumed Contract or made any modification or amendment to any Assumed Contract or terminated any Assumed Contract;

(g) Changed the Seller’s credit policies or the prices charged for any of the Seller’s products or services, except in accordance with the Seller’s past practices;

(h) Had any labor disputes, disturbances or grievances;

(i) Cancelled, waived, assigned or otherwise transferred any right of the Seller with a value to the Seller equal to or in excess of $10,000;

(j) Entered into any Contract not in the Ordinary Course of Business; or

(k) Agreed or committed, whether orally or in writing, to do any of the foregoing.

5.1.22. Compliance With Environmental Laws.

(a) Except in material compliance with all Environmental Laws, and all Orders and Governmental Approvals applicable thereto (i) there are no and, to the Seller’s Knowledge, there have never been any Hazardous Substances at, on, in, above, under or removed from the Leased Real Property, (ii) there are no and, to the Seller’s Knowledge, there have never been any Hazardous Substances on any property adjacent to the Leased Real Property, including, without limitation, any Hazardous Substances originating or emanating from any other property that are present on, in, above or under the Leased Real Property or Hazardous Substances originating or emanating from the Leased Real Property that are present on, in, above or under any other property, and (iii) no Hazardous Substances have ever been generated, treated, stored, disposed of, handled

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on, spilled, discharged or released on or removed from the Leased Real Property by the Seller, the Parent or, to the Seller’s Knowledge, any third Person.

(b) None of the Seller, the Parent or, to the Seller’s Knowledge, any current or former owner of the Leased Real Property has received any notice from any Governmental Body or any other third Person of (i) any Hazardous Substances which have been generated, treated, stored, handled or removed from or disposed of on the Leased Real Property, (ii) any Hazardous Substance which has migrated on, in, above, under or to the Leased Real Property from any adjacent property or which has migrated, emanated or originated from the Leased Real Property onto any other property, or (iii) any violation of any actual or potential liability, responsibility or obligation arising out of or relating to any Environmental Law with respect to the Seller or the Leased Real Property.

(c) The Seller has obtained all necessary Governmental Approvals from, made all filings with and provided all notifications to any Governmental Body or other third Person required for the operation of the Subject Business and the use of the Leased Real Property as it is used as of the date hereof by the Seller. The Disclosure Schedule contains a list of all Governmental Approvals held by the Seller relating to any Environmental Law. All Governmental Approvals held by the Seller or used in connection with the Subject Business are fully transferable to the Buyer.

(d) No action concerning any Environmental Law has been taken or, to the Seller’s Knowledge, is currently threatened against the Seller and no action concerning any Environmental Law, to the Seller’s Knowledge, is currently threatened against any current or former owner of the Leased Real Property by any Governmental Body or other third Person.

(e) The Seller and the Subject Assets are and at all times in the past have been in compliance in all material respects with each Environmental Law and with all Governmental Approvals issued, granted, given or otherwise made available by or under the authority of any Governmental Body under any Environmental Law.

(f) Except for filings required under the Property Transfer Act, the consummation of the transactions contemplated by this Agreement do not (i) impose any obligation on the Seller under any Environmental Law, including, without limitation, for the investigation or cleanup of the Leased Real Property, or (ii) require providing notification to or obtaining the consent of any Governmental Body or other third Person pursuant to any Environmental Law.

(g) The Leased Real Property does not contain and, to the Seller’s Knowledge, has never contained any (i) aboveground storage tanks, (ii) asbestos-containing material, polychlorinated biphenyls, radon, or urea formaldehyde foam, (iii) landfill or dumps, (iv) septic systems or wells of any type, or (v) a hazardous waste management facility as defined under the Resource Conservation and Recovery Act of 1976 (as amended by the Hazardous and Solid Waste Amendment of 1984) and the rules

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and regulations promulgated thereunder, each as amended to date, or any comparable Law.

(h) No action or failure to act by the Seller, the Parent or, to the Seller’s Knowledge, any current or former owner of the Leased Real Property has occurred with respect to the Leased Real Property which, with the passage of time, the giving of notice, or both, would constitute a violation of any Environmental Law or give rise to any Environmental Claim.

(i) The Subject Assets are not required to be upgraded, modified or replaced to be in compliance with any existing Governmental Approval related to any Environmental Law.

5.1.23. Insurance. The Seller maintains policies of fire and casualty, liability and other forms of insurance and bonds in such amounts, with such deductibles, and against such risks and losses as the Seller deems reasonable for the Subject Business and the Subject Assets, individually and in the aggregate. A true and complete list of all such insurance and bonds currently maintained by the Seller is attached to the Disclosure Schedule. The Seller’s comprehensive general liability insurance policy is endorsed so that it covers all occurrences relating to products sold and services provided by the Seller prior to the Closing Date, regardless of when the claim is made. Each such insurance policy and bond is in full force and effect and neither the Seller nor the Parent has received notice of or is otherwise aware of any cancellation or threat of cancellation of any such insurance policy or bond. The Disclosure Schedule sets forth all property damage, personal injury, workers’ compensation, products liability or other claims that have been made against the Seller in the last five (5) years or which are pending or, to the Seller’s Knowledge, threatened against the Seller.

5.1.24. Governmental Approvals. Attached to the Disclosure Schedule is a true, correct and complete list of all Governmental Approvals issued or granted to the Seller which relate to the Subject Business or the Subject Assets, including the Seller’s use or occupancy of the Leased Real Property. The Seller is in compliance with and has all Governmental Approvals required by all applicable Laws in the operation of the Subject Business, except such Governmental Approvals where a failure to comply or to have such Governmental Approvals would not have a Material Adverse Effect, and all such Governmental Approvals are valid, current and effective. Neither the Seller nor the Parent has received any notice that any applicable Governmental Body intends to modify, cancel, terminate or fail to renew any Governmental Approval held by the Seller as a result of the consummation of any of the transactions contemplated by this Agreement or otherwise.

5.1.25. Compliance With Laws and Orders. The operation of the Subject Business and the sale of its products and provision of its services is and has been in compliance in all material respects with all applicable Laws and all Orders. No notice has been issued nor is any Proceeding pending or, to the Seller’s Knowledge, threatened (i) with respect to any alleged violation by the Seller or any employee, agent or representative of the Seller of any applicable Law or Order, or (ii) with respect to any alleged failure to have Governmental Approvals required by applicable Law in connection with the operation of the Subject Business or the ownership or use of the Subject Assets.

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5.1.26. Customers; Suppliers. The Disclosure Schedule sets forth, with respect to the last three (3) fiscal years of the Seller and with respect to the year-to-date period ended on April 16, 2008, a list of (i) the dollar amount derived from each of the ten (10) largest (based on dollar amounts purchased from the Seller) customers of the Seller, and (ii) the dollar amount purchased from the ten (10) largest (based on dollar amounts purchased by the Seller) suppliers of the Seller. Neither the Seller nor the Parent has received any notice or indication of the intention of any of the customers, suppliers or other third Persons to material Contracts of the Subject Business, including the Assumed Contracts, to cease doing business or reduce in any material respect the business transacted with the Subject Business or to terminate or modify any Contracts with the Subject Business, including the Assumed Contracts (whether upon consummation of the transactions contemplated by this Agreement or otherwise).

5.1.27. Relationships with Related Persons. Neither the Parent nor any Affiliate of the Parent is party to any Contract with, or has any claim or right against, the Seller, or has owned an equity or any other financial or profit interest in any Person that has (i) had business dealings or a financial interest in any transaction with the Seller, or (ii) engaged in competition with the Seller with respect to any line of products sold or services provided by the Seller.

5.1.28. Territorial Restrictions. Neither the Seller nor the Parent is restricted by any Contract from conducting the Subject Business anywhere in the world. The Buyer, as a result of the consummation of the transactions contemplated by this Agreement, will not become restricted from conducting the Subject Business anywhere in the world.

5.1.29. Brokers; Agents. Neither the Seller nor the Parent has dealt with any agent, finder, broker or other representative in any manner which could result in the Buyer being liable for any fee or commission in the nature of a finder’s fee or originator’s fee in connection with the subject matter of this Agreement and the Ancillary Documents.

5.2. Warranties and Representations Survive Closing. Notwithstanding any investigation by or information supplied to the Buyer, the respective warranties and representations of the Seller and the Parent contained in this Agreement, the schedules attached hereto, including the Disclosure Schedule (as supplemented pursuant to Paragraph 8.2, below), each Seller Ancillary Document or in any writing to be furnished pursuant hereto shall be true and correct on the Closing Date and shall survive the Closing Date: (i) as to the warranties and representations contained in the first sentence of Paragraphs 5.1.6 and 5.19(b), above (but, with respect to Paragraph 5.19(b), only as such warranties and representations relate to the payment of social security, payroll and similar Taxes), clause (i) of Paragraph 5.1.11(c), above, the first three sentences of Paragraph 5.1.1, above, and all of Paragraph 5.1.3, above, indefinitely; (ii) as to the warranties and representations contained in all of Paragraph 5.1.4, above, for five (5) years; (iii) as to the warranties and representations contained in the first sentence of Paragraphs 5.1.10 and 5.1.25, above, and all of Paragraphs 5.1.13, 5.1.20 and 5.1.22, above, for the same period as the statute of limitations applicable thereto plus ninety (90) days; and (iv) as to all other warranties and representations, for eighteen (18) months. Except for the warranties and representations specified in clause (i) of this Paragraph 5.2, each of which shall survive the Closing indefinitely, any claim by the Buyer for indemnification under clause (i) of Paragraph 10.1, below, made in writing prior to the expiration of the survival period applicable thereto, and the rights of indemnity with respect thereto, shall survive such expiration until resolved or judicially

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determined; and any such claim not so made in writing prior to the expiration of such applicable survival period shall be deemed to have been waived.

5.3. Seller’s Knowledge. For those warranties and representations set forth in this Article V which are subject to the qualification “to the Seller’s Knowledge,” the Seller and the Parent shall be deemed to have knowledge of a matter if (i) any member of the senior management of the Seller, consisting of Gerald Shaff, Susan Peck, Elizabeth Bacon or Philip Bacon, has actual knowledge of such matter, or (ii) such matter has come, or should reasonably be expected to have come, to the attention of any of the Persons referred to in clause (i) of this Paragraph 5.3 if such individual had conducted a reasonable due diligence review of the Subject Business and the Subject Assets, including reasonable inquiries to key personnel and a review of, and discussions with key personnel regarding, the books, records and operations of the Subject Business and the Subject Assets relating to the matters set forth in such warranties and representations.

ARTICLE VI

Joint and Several Covenants of Seller and Parent

The Seller and the Parent jointly and severally covenant and agree as follows:

6.1. Conduct of Subject Business in Ordinary Course. Until the Closing, the Seller shall use, and the Parent shall cause the Seller to use, its commercially reasonable efforts to carry on the Subject Business diligently and substantially in the manner as heretofore conducted, and shall not make or initiate any unusual or novel methods of purchase, sale, management, accounting or operation, or make any adjustments in the pricing or advertising of its products or services not consistent with the past practices of the Seller. The Seller shall use, and the Parent shall cause the Seller to use, its commercially reasonable efforts to preserve for the Buyer the organization of the Subject Business as it exists on the date hereof, including all key employees and the Seller’s relationship with suppliers, customers and advertisers and others having business relations with the Subject Business.

6.2. Employees. The Seller will terminate the employment of all of the employees of the Subject Business as of the Closing Date. The Buyer may, but will not be obligated to, offer employment to any or all of the employees of the Subject Business. The Seller and the Parent will provide reasonable assistance, to the extent requested, to the Buyer in retaining those employees of the Subject Business whom the Buyer elects to hire in connection with the operation of the Subject Business subsequent to the Closing. The Buyer shall not have any liability or obligation under any Contract of the Seller or the Parent with employees of the Subject Business, including, without limitation, any benefit plan or program maintained by the Seller for employees of the Subject Business (including any of the Plans). With respect to the employees of the Subject Business (whether or not hired by the Buyer on or after the Closing Date), the Seller shall retain responsibility for and shall pay when due any and all costs, including wages, benefits, employment-related Taxes, health care costs, severance and other termination-related costs, and any other employment-related costs relating to the period during which such employees were employed by the Seller or any predecessor of the Seller on or prior to the Closing Date. Within thirty (30) days of the Closing Date, the Seller shall make its

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contribution for the 2008 plan year to the Custom Products Corporation Money Purchase Pension Plan for the employees of the Subject Business, notwithstanding any requirement that an employee complete 1,000 hours of service during 2008, or be employed on the last day of the 2008 plan year or any other service requirement that would restrict any employee’s right to receive an employer contribution for the 2008 plan year. The Buyer shall pay bonuses for the 2008 calendar year to the employees of the Subject Business in an aggregate amount not less than fifty percent (50%) of the amount, prorated through the Closing Date, of the aggregate amount of the bonuses paid by the Seller to such employees in 2007.

6.3. Use of Tradenames. After the Closing, neither the Seller nor the Parent shall, directly or indirectly, use the name “Custom Products Corporation”, “Polyclutch”, “Polyvolt” or “Puljak” or any derivatives of any of the foregoing.

6.4. Collection of Accounts Receivable. The Seller and the Parent jointly and severally guarantee collection by the Buyer of the full face amount of the Accounts Receivable within a six (6) month period (the “A/R Collection Period”) commencing on the Closing Date. Subject to the following provisions of this Paragraph 6.4, the Seller and the Parent jointly and severally agree to pay the Buyer an amount equal to the then uncollected balance (the “Reassigned Balance”) of those Accounts Receivable (subject to any reserve reflected on the Financial Statements) which the Buyer elects to reassign (each, a “Notice of Reassignment”) to the Seller (collectively, the “Reassigned Receivables”) within five (5) days of receipt by the Seller of any Notice of Reassignment. The joint and several obligations of the Seller and the Parent under this Paragraph 6.4 are subject to the following provisions:

(a) Unless the amount of, or obligation to pay, a specific Account Receivable is disputed by the debtor named therein or if the account debtor under any Account Receivable shall direct the application of any payment to a specific outstanding account, all amounts collected by the Buyer from such debtor shall be applied in chronological order starting with the oldest receivable or installment, as the case may be, owing by such debtor.

(b) The Buyer shall deliver to the Seller, with each Notice of Reassignment, a statement setting forth the Reassigned Receivables, including the name of the debtor and the uncollected balance of each Reassigned Receivable, together with the payment history of such debtor from the Closing Date and a copy of the notification given by the Buyer pursuant to subparagraph (c), below.

(c) On or before the giving of a Notice of Reassignment, the Buyer shall provide notification to the related debtors for the Reassigned Receivables to remit all future payments, if any, directly to the Seller and, to the extent the Buyer receives payment from such debtor after the Buyer provides a Notice of Reassignment but before the Seller receives full payment of the uncollected balance of such Reassigned Receivables, the Buyer shall hold such payment in trust for the benefit of the Seller until the Seller is paid in full in accordance with the provisions of this Paragraph 6.4.

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6.5. Restrictive Covenants.

(a) Non-Competition. The Seller and the Parent acknowledge and agree that at no time for a period of five (5) consecutive years immediately after the Closing Date shall either of them, directly or indirectly (including, without limitation, through an Affiliate), whether as an agent, equity holder (except as the holder of not more than five percent (5%) of the equity securities of a publicly held enterprise as long as such party does not render advice or assistance to such enterprise), employer, employee, consultant, representative, trustee, partner, proprietor or otherwise:

(i) Acquire an ownership interest in, work for, render advice or assistance to, or otherwise engage in or enter into any aspects of the business of, any Competitor;

(ii) Contact, solicit or entice, or attempt to contact, solicit or entice, any supplier, customer or independent contractor of the Subject Business from whom the Subject Business received material or services or to whom the Subject Business offered or sold products at any time during the two (2) year period immediately preceding the Closing Date, so as to cause, or attempt to cause, any of said suppliers, customers or independent contractors not to do business with the Buyer or the Subject Business or to purchase products offered or sold by the Subject Business or the Buyer from any source other than the Buyer; or

(iii) Contact, solicit or entice, or attempt to contact, solicit or entice, any individual who is currently an employee of the Subject Business, or any individual who is employed by the Buyer on or after the date hereof in connection with the Subject Business, to induce such individual to leave the employ or service of the Buyer or to accept employment elsewhere.

The restrictions set forth in subparagraphs (i) and (ii), above, shall not apply to a Person unaffiliated with the Parent as of the Closing who subsequently acquires the Parent, or who is an Affiliate of such unaffiliated Person, or who is subsequently acquired by the Parent and has a pre-existing business accounting for not more than 20% of the total revenues of such acquired entity.

(b) Nondisclosure. The Seller and the Parent acknowledge and agree that at no time for a period of ten (10) consecutive years immediately after the Closing Date shall either of them use or disclose any Confidential Information to anyone other than to employees and representatives of the Buyer, except any such Confidential Information which is required to be disclosed by the Seller or the Parent in connection with any Proceeding or pursuant to any applicable Law, and then only after the Seller or the Parent, as the case may be, has given written notice to the Buyer of the intention so to disclose such Confidential Information and has given the Buyer a reasonable opportunity to contest the need for such disclosure or request a protective order protecting the confidentiality of such information, and the Seller and the Parent shall cooperate with the Buyer in connection with any such contest or request. Notwithstanding the foregoing, the Seller and the Parent acknowledge and agree that nothing in this Agreement shall be

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construed to limit or supersede the common law of torts or statutory or other protection of trade secrets where such Law provides the Buyer with greater protections or protections for a longer duration than that provided in this Paragraph 6.5.

(c) Enforcement. In addition to all other legal remedies available to the Buyer for the enforcement of the covenants set forth in this Paragraph 6.5, the Seller and the Parent acknowledge and agree that the Buyer shall be entitled to temporary and/or permanent injunctive relief by any court of competent jurisdiction without the necessity of posting any bond or other security to prevent or restrain any breach or threatened breach hereof.

6.6. Termination Notices. With respect to the sales representative and employment agreements listed as items 3(a), 3(b) and 6 on Schedule 1.1(k) attached hereto (the “Subject Agreements”), within two (2) business days of the date of execution of this Agreement (or such later date requested by the Buyer), the Seller shall deliver to each of the other parties to the Subject Agreements a written notice of termination to be effective at the earliest date that is permissible under the applicable provisions of each respective Subject Agreement.

ARTICLE VII

Warranties and Representations of Buyer

7.1. Warranties and Representations. The Buyer hereby warrants and represents to the Seller and the Parent, which warranties and representations shall survive the Closing Date for the period set forth in Paragraph 7.2, below, as follows:

7.1.1. Corporate Matters; Authority. The Buyer is a corporation duly incorporated, validly existing and in active status under the laws of the State of Wisconsin. The Buyer has the corporate power and authority to carry on all business activities now conducted by the Buyer. The Buyer has the corporate power and authority to enter into this Agreement and the Buyer Ancillary Documents and to consummate the transactions contemplated hereby or thereby. The execution, delivery and performance by the Buyer of this Agreement and the Buyer Ancillary Documents have been approved by all necessary corporate action of the Buyer and are and shall constitute the valid and legally binding obligations of the Buyer, enforceable against it in accordance with their respective terms.

7.1.2. No Conflict. The execution and delivery of this Agreement and the Buyer Ancillary Documents by the Buyer do not, and the consummation of the transactions contemplated hereby or thereby and compliance with the terms hereof or thereof by the Buyer will not (a) conflict with or result in any breach or violation of (i) any provision of the Articles of Incorporation or By-Laws of the Buyer, or (ii) any Law or Order applicable to the Buyer; or (b) violate or conflict with, or result in a breach or default under, or require any consent, notice or waiver under, any Contract to which the Buyer is a party or is subject. No Governmental Approval from, or registration, declaration or filing by the Buyer with, any Governmental Body or other third Person is required to be obtained or made by the Buyer in connection with the Buyer’s execution and delivery of this Agreement and the Buyer Ancillary Documents or the

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consummation or performance by the Buyer of any of the transactions contemplated hereby or thereby.

7.1.3. Brokers; Agents. The Buyer has not dealt with any agent, finder, broker or other representative in any manner which could result in the Seller or the Parent being liable for any fee or commission in the nature of a finder’s or originator’s fee in connection with the subject matter of this Agreement and the Ancillary Documents.

7.2. Warranties and Representations Survive Closing. Notwithstanding any investigation by or information supplied to the Seller or the Parent, the warranties and representations of the Buyer contained in this Agreement, the schedules attached hereto, each Buyer Ancillary Document or in any writing to be furnished pursuant hereto shall be true and correct on the Closing Date and shall survive the Closing Date indefinitely.

ARTICLE VIII

Disclosure Schedule

8.1. Notice of Developments. From the date of this Agreement until the Closing Date, the Seller and the Parent will give the Buyer prompt written notice upon becoming aware of any event or circumstance that has resulted in a material breach of, or material inaccuracy in, any of the Seller’s or the Parent’s representations and warranties.

8.2. Updates to Disclosure Schedule. The Seller and the Parent shall have the right to supplement the Disclosure Schedule prior to the Closing to reflect any new events, circumstances or changes which arise after the date hereof (and which, if existing on the date hereof, would have been required to be disclosed in respect of the representations and warranties in Article V, above, in the Disclosure Schedule (each, a “New Disclosure Matter”)) by delivery to the Buyer prior to the Closing Date of one or more supplements (each, a “Disclosure Supplement”); provided, however, that if a Disclosure Supplement is delivered to the Buyer at any time during the five business day period immediately preceding the parties’ projected Closing Date, or on the parties’ projected Closing Date (but prior to the Closing), the Buyer may, in its sole discretion, notwithstanding Paragraph 11.1(c), below, choose to delay the Closing for a period of up to five business days so that the Buyer may consider fully the matter(s) disclosed in such Disclosure Supplement. The Buyer shall have the right under Article XI, below, to (i) terminate this Agreement by written notice to the Seller within five business days after receipt of a Disclosure Supplement setting forth any New Disclosure Matter that, if existing at the Closing and not disclosed pursuant to this Paragraph 8.2, would have caused any of the conditions set forth in Paragraph 4.2(a), above, to not be satisfied and such New Disclosure Matter has had or could have a Material Adverse Effect, or (ii) to consummate the transactions contemplated by this Agreement. To the extent that the Buyer elects to so consummate such transactions, the Disclosure Schedule shall be deemed amended and supplemented (including for the purposes of determining the satisfaction of the conditions set forth in Section 4.2(a)) by all information set forth in each Disclosure Supplement as if amended on the date hereof, and each of the warranties and representations of the Seller or the Parent, as the case may be, made in this Agreement shall be deemed amended and supplemented by all such information set forth in each Disclosure Supplement as if amended on the date hereof.

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ARTICLE IX

Mutual Covenants

The Seller, the Parent and the Buyer each covenant and agree as follows:

9.1. Cooperation. The Seller, the Parent and the Buyer will cooperate with each other and will cause their respective officers, employees, agents, accountants, attorneys and representatives to cooperate with each other after the Closing to ensure the orderly transition of the ownership of the Subject Business from the Seller to the Buyer and to minimize any disruption to the Subject Business that might result from the transactions contemplated hereby.

9.2. Records.

(a) On the Closing Date, the Seller will deliver or cause to be delivered to the Buyer all original Records in the possession or control of the Seller or the Parent.

(b) After the Closing, upon reasonable written notice, the Seller and the Parent, on the one hand, and the Buyer, on the other hand, agree to furnish or cause to be furnished to each other and their respective representatives, employees, counsel and accountants access, during normal business hours, to such information and assistance relating to the Subject Business or the Subject Assets as is reasonably necessary for financial reporting and accounting matters, the preparation and filing of any returns, reports or forms or the defense of any Tax claim or assessment; provided, however, that such access does not unreasonably disrupt the normal operations of the Buyer.

9.3. Publicity. During the period ending ten (10) days after the Closing Date, neither party shall make any public release or announcements concerning the transactions contemplated hereby without the consent of the other party, except if required by law, including, without limitation, applicable securities laws, and with advance notice to the other party of such required disclosure proposed to be made.

9.4. Execution of Additional Documents. From time to time, as and when requested by a party hereto and at the expense of such requesting party, each party hereto will execute and deliver, or cause to be executed and delivered, all such documents and instruments and will take, or cause to be taken, all such further or other actions as are necessary to consummate the transactions contemplated by this Agreement.

9.5. Risk of Loss. Risk of loss, damage or destruction to any of the Subject Assets shall be upon the Seller until 11:59 p.m. (Connecticut time) on the Closing Date and thereafter upon the Buyer.

9.6. Environmental Remediation. Following the Closing, the Seller shall, at its sole cost and expense, promptly proceed to take all steps, including, without limitation, any and all investigative and remedial measures, as are necessary to satisfy all requirements and obligations of the Property Transfer Act; provided, however, that, with respect to the initial $120,000 of costs associated with the filing fees for the Property Transfer Act form described in Paragraph 4.2(viii), above, filed by the Seller and such investigative and remedial measures (or such lesser

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amount as may be required), the Buyer agrees to bear one-third of such costs. For purposes of clarification, (i) the maximum amount of costs that the Buyer may incur pursuant to the preceding sentence shall be $40,000 and (ii) the costs that the Buyer may incur pursuant to the preceding sentence shall not include any costs relating to the Phase I and Phase II Environmental Reports conducted by LFR, Inc. and identified on Section 5.1.22 of the Disclosure Schedule prior to the date hereof.

ARTICLE X

Indemnification

10.1. Indemnification of Buyer. The Seller and the Parent jointly and severally agree to indemnify the Buyer and its directors, officers and employees (collectively, the “Buyer Indemnitees”) and to hold each of the Buyer Indemnitees harmless from and against any and all Losses of or against any of the Buyer Indemnitees resulting from: (i) any misrepresentation or breach of warranty or representation on the part of the Seller or the Parent in this Agreement (as each such representation or warranty would read if all qualifications as to materiality, including each reference to the defined term “Material Adverse Effect”, were deleted therefrom); (ii) any breach or nonfulfillment by the Seller or the Parent of any agreement or covenant contained in this Agreement or in any Seller Ancillary Document; (iii) any failure of the Seller or the Parent to pay and/or perform any of the Excluded Liabilities; (iv) any assessments, claims or liabilities (including interest and penalties) for any Taxes relating to, imposed upon, or assessed against any of the Subject Assets, the Subject Business, the Seller or the Parent for periods prior to and including the Closing Date; (v) any employment-related costs relating to periods prior to and including the Closing Date, including, without limitation, any and all wages, benefits, employment-related Taxes, health care costs, severance, separation and other termination-related costs; and (vi) any Environmental Claim.

10.2. Indemnification of Seller and Parent. The Buyer agrees to indemnify the Seller and the Parent and their respective directors, officers and employees (collectively, the “Seller Indemnitees”) and to hold each of them harmless from and against any and all Losses of or against any of the Seller Indemnitees resulting from: (i) any misrepresentation or breach of warranty or representation on the part of the Buyer in this Agreement; (ii) any breach or nonfulfillment by the Buyer of any agreement or covenant contained in this Agreement or in any Buyer Ancillary Document; or (iii) any failure of the Buyer to pay or perform any of the Assumed Liabilities.

10.3. Procedure Relative to Indemnification.

(a) In the event that any of the Buyer Indemnitees or the Seller Indemnitees, as the case may be, shall claim that it is entitled to be indemnified pursuant to the terms of this Article X, it (the “Claiming Party”) shall so notify the party or parties against which the claim is made (the “Indemnifying Party”) in writing (each, a “Claims Notice”) of such claim within thirty (30) days after the Claiming Party receives notice of any demand, claim or circumstance which is reasonably likely to give rise to a claim or the commencement of any Proceeding (an “Asserted Liability”) that may reasonably be expected to result in a claim for indemnification by the Claiming Party against the

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Indemnifying Party, which Claims Notice shall include the deadline of any responsive filing or pleading of which the Claiming Party has actual notice; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure. Each Claims Notice shall describe the Asserted Liability in reasonable detail, and shall indicate the amount (estimated, if necessary) of the Losses that have been or may be suffered by the Claiming Party; provided, however, that failure to provide such reasonable detail shall not affect the indemnification provided hereunder except to the extent that such failure shall actually and materially prejudice the Indemnifying Party; and provided, further, that in no event shall the Claiming Party’s right to recover Losses from the Indemnifying Party be limited to the amount set forth or estimated in such Claims Notice. If the amount of Losses are liquidated, each Claims Notice shall so state and such amount shall be deemed the amount of the claim of the Claiming Party. If the amount of Losses are not liquidated, each Claims Notice shall so state and in such event a claim shall be deemed asserted against the Indemnifying Party on behalf of the Claiming Party, but no payment shall be made on account thereof until the amount of Losses is liquidated and the claim is finally determined.

(b) The following provisions shall apply to claims of the Claiming Party which are based upon a Proceeding filed or instituted by any third Person, including by any Governmental Body:

(i) Upon receipt of a Claims Notice involving an Asserted Liability against or sought to be collected by any such third Person, the Indemnifying Party shall notify the Claiming Party prior to the earlier of twenty (20) days after its receipt of such Claims Notice or fifteen (15) days prior to the deadline of any responsive filing or pleading required in such Proceeding (A) if the Indemnifying Party disputes the Indemnifying Party’s liability for indemnification under this Article X with respect to such Asserted Liability and whether the Indemnifying Party desires to defend against such Asserted Liability; or (B) if the Indemnifying Party does not dispute the Indemnifying Party’s liability for indemnification under this Article X with respect to such Asserted Liability and whether the Indemnifying Party desires to defend against such Asserted Liability.

(ii) If the Indemnifying Party notifies the Claiming Party, prior to the earlier of twenty (20) days after its receipt of the Claims Notice or fifteen (15) days prior to the deadline of any responsive filing or pleading required in such Proceeding, that the Indemnifying Party does not dispute the Indemnifying Party’s obligation to indemnify under this Article X and desires to defend against such Asserted Liability, then the Indemnifying Party shall assume the defense of such Asserted Liability with counsel of the Indemnifying Party’s choice (reasonably acceptable to the Claiming Party) and, after notice from the Indemnifying Party to the Claiming Party of its election to assume the defense of such Asserted Liability, the Indemnifying Party will not, as long as it diligently conducts such defense, be liable to the Claiming Party under this Article X for any fees of other counsel or any other expenses with respect to the defense of such Asserted Liability, in each case subsequently incurred by the Claiming Party

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in connection with the defense of such Asserted Liability. The Claiming Party shall cooperate, at the Indemnifying Party’s expense, in the compromise of, or defense against, such Asserted Liability and may participate in, but not control, such Asserted Liability at its own expense. If the Indemnifying Party is controlling the defense of an Asserted Liability, no compromise or settlement of such Asserted Liability may be effected without the Claiming Party’s prior written consent (which consent shall not be unreasonably withheld or delayed) unless (A) there is no finding or admission of any violation by the Claiming Party of any Law or the rights of any Person, and no effect on any other claims that may be made against the Claiming Party, and (B) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party. If the Indemnifying Party notifies the Claiming Party, prior to the earlier of twenty (20) days after its receipt of the Claims Notice or fifteen (15) days prior to the deadline of any responsive filing or pleading required in such Proceeding, that the Indemnifying Party does not dispute the Indemnifying Party’s obligation to indemnify under this Article X, but does not notify the Claiming Party within such period that the Indemnifying Party elects to assume the defense of such Asserted Liability, then the Claiming Party will have the right to conduct a defense of the Asserted Liability until and unless the Indemnifying Party subsequently elects to assume the defense of such Assumed Liability, and the Indemnifying Party will be bound by any determination made with respect to such Asserted Liability or any compromise or settlement effected by the Claiming Party and the Indemnifying Party will be responsible for paying all fees and expenses incurred by the Claiming Party in connection with such defense incurred up until the Indemnifying Party does in fact assume such defense.

(iii) If the Indemnifying Party notifies the Claiming Party prior to the earlier of twenty (20) days after its receipt of the Claims Notice or fifteen (15) days prior to the deadline of any responsive filing or pleading required in such Proceeding, that the Indemnifying Party disputes the Indemnifying Party’s obligation to indemnify under this Article X, or does not respond to the Claims Notice as required by Paragraph 10.3(b)(i), above, within such period, then the Claiming Party will have the right to conduct a defense of the Asserted Liability and the Indemnifying Party will be bound by any determination made with respect to such Asserted Liability or any compromise or settlement effected by the Claiming Party; provided, that the Claiming Party’s assumption of such defense shall not constitute a waiver of any right to receive indemnification against Losses under Paragraphs 10.1 or 10.2, above, as the case may be, including, without limitation, any fees and expenses relating to such defense. If the Indemnifying Party subsequently requests to assume the defense of such Asserted Liability and the Claiming Party elects to allow the Indemnifying Party to assume such defense of such Asserted Liability, such election not to be unreasonably withheld or delayed, then the Indemnifying Party shall assume the defense of such Asserted Liability in accordance with the provisions of Paragraph 10.3(b)(ii), above; provided, that (A) the Indemnifying Party shall not have the right to seek reimbursement or payment from the Claiming Party of any fees or expenses incurred, or payments made, by the Indemnifying Party in defense, settlement or

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satisfaction of such Asserted Liability, (B) the Indemnifying Party shall agree in writing to waive all rights and claims against the Claiming Party in connection with such Asserted Liability, (C) all rights of the Claiming Party to seek indemnification from the Indemnifying Party with respect to the Asserted Liability shall remain in full force and effect, and (D) the Indemnifying Party’s assumption of such defense shall not constitute an admission of any liability for indemnification against Losses under Paragraphs 10.1 or 10.2, above, as the case may be, with respect to such Asserted Liability.

(iv) Notwithstanding the foregoing, if the Claiming Party determines in good faith that an Asserted Liability is likely to adversely affect it or any Affiliate other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Claiming Party may, by notice to the Indemnifying Party, assume the exclusive right to defend, compromise or settle such Asserted Liability, but the Indemnifying Party will not be bound by any determination of an Asserted Liability so defended or any compromise or settlement effected without its prior written consent (which consent shall not be unreasonably withheld or delayed).

(c) Upon receipt of a Claims Notice involving an Asserted Liability that does not involve an Asserted Liability against or sought to be collected by any third Person, including any Governmental Body, then the Indemnifying Party shall have thirty (30) days from the receipt of such Claims Notice to notify the Claiming Party that the Indemnifying Party disputes such Asserted Liability. If the Indemnifying Party does not so notify the Claiming Party, then the amount of such Asserted Liability shall be deemed, conclusively, a liability of the Indemnifying Party hereunder. If the Indemnifying Party shall object in writing to such Asserted Liability as provided herein, then the Claiming Party shall have thirty (30) days to respond in a written statement to the objection of the Indemnifying Party. If after such thirty (30) day period there remains a dispute as to such Asserted Liability, then the parties shall attempt in good faith for an additional period of thirty (30) days to agree upon the rights of the respective parties with respect to such Asserted Liability. If the parties should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties. If the parties do not so agree, then the Claiming Party may pursue any other remedies available to it hereunder or otherwise.

10.4. Limitations on Indemnification.

(a) Subject to Paragraph 10.4(c), below, neither the Seller nor the Parent shall be required to indemnify any of the Buyer Indemnitees or make any payment with respect to any Losses arising under clause (i) of Paragraph 10.1, above, unless and until the aggregate amount of such Losses from a single claim (or series of related claims) for which indemnification is sought under such clause exceeds $5,000 and unless and until the aggregate amount of such Losses for which indemnification is sought under such clause exceeds $50,000 (the “Threshold Amount”), in which event the Buyer Indemnitees shall only be entitled to indemnification for Losses in excess of the Threshold Amount.

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(b) Subject to Paragraph 10.4(c), below, neither the Seller nor the Parent shall be required to indemnify any of the Buyer Indemnitees or make any payment with respect to any Losses arising under clause (i) of Paragraph 10.1, above, in an aggregate amount in excess of fifty percent (50%) of the Purchase Price.

(c) Notwithstanding the provisions of Paragraphs 10.4(a) and (b), above, the limitations set forth in Paragraphs 10.4(a) and (b), above shall not apply with respect to any claims by any of the Buyer Indemnitees for indemnification (1) based upon clauses (ii) through (vi) of Paragraph 10.1, above, (2) based upon breach of the warranties and representations set forth in the first sentence of Paragraph 5.1.6, clause (i) of Paragraph 5.1.11(c) or Paragraphs 5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.12 or 5.1.22, (3) based upon any failure of the Seller to fully satisfy its obligations under Paragraph 9.6, above, or (4) for fraud by the Seller or the Parent under this Agreement or any Seller Ancillary Document.

(d) No party to this Agreement shall be liable for any punitive, exemplary, consequential, special or similar damages arising out of or relating to this Agreement, except to the extent any of the Buyer Indemnitees or the Seller Indemnitees, as the case may be, suffers damages to any third Person (including any Governmental Body) in connection with a claim by such third Person, in which case such damages shall be recoverable to the extent recoverable under this Article X without giving effect to this Paragraph 10.4(d).

ARTICLE XI

Termination

11.1. Termination Events. This Agreement may, by notice given prior to or at the Closing, be terminated:

(a) By the Buyer if any of the conditions set forth in Paragraph 4.2, above (and subject to the provisions of Paragraph 8.2, above), have not been satisfied as of the later of the Closing Date or the stated deadline applicable thereto or if satisfaction of such a condition is or becomes impossible (other than through the failure of the Buyer to comply with its obligations under this Agreement) and the Buyer has not waived such condition on or before the Closing Date;

(b) By the Seller if any of the conditions set forth in Paragraph 4.3, above, have not been satisfied as of the later of the Closing Date or the stated deadline applicable thereto or if satisfaction of such a condition is or becomes impossible (other than through the failure of the Seller or the Parent, as the case may be, to comply with such party’s obligations under this Agreement) and the Seller and the Parent have not waived such condition on or before the Closing Date;

(c) By either the Buyer or the Seller if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before June 30, 2008 or such later date

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as the Seller, the Parent and the Buyer may agree upon in writing, or as may result from the Buyer electing to delay the Closing pursuant to Paragraph 8.2, above; or

(d) By mutual written consent of the Seller, the Parent and the Buyer.

11.2. Effect of Termination. If this Agreement is terminated pursuant to Paragraph 11.1, above, this Agreement shall forthwith become null and void and there shall be no liability on the part of any party hereto except as set forth in this Paragraph 11.2; provided, however:

(a) No such termination shall relieve any party hereto from liability for any breach by such party of any provision of this Agreement occurring on or prior to the date of such termination; and

(b) No such termination shall diminish, limit or affect in any way any right of any party hereto to seek any remedy available to such party at law, in equity or otherwise, in connection with any breach referred to in Paragraph 11.2(a), above.

ARTICLE XII

Definitions

“A/R Collection Period” has the meaning set forth in Paragraph 6.4, above.

“Accounts Receivable” has the meaning set forth in Paragraph 1.1(f), above.

“Affiliate” means, with reference to any Person, another Person controlled by, under the control of, or under common control with, such Person. For purposes of this definition, the term “control” shall mean the power to elect a majority of the members of the Board of Directors or other governing body of such Affiliate or the power to direct the affairs of such Affiliate, whether by reason of the ownership of voting equity, by contract or otherwise.

“Agreement” has the meaning set forth in the preface, above.

“Ancillary Documents” means, collectively, the Buyer Ancillary Documents and the Seller Ancillary Documents.

“Asserted Liability” has the meaning set forth in Paragraph 10.3(a), above.

“Assignment and Assumption Agreement” has the meaning set forth in Paragraph 4.2(d), above.

“Assumed Contracts” has the meaning set forth in Paragraph 1.1(k), above.

“Assumed Liabilities” has the meaning set forth in Article III, above.

“Buyer” has the meaning set forth in the preface, above.

“Buyer Ancillary Documents” means, collectively, the agreements, instruments and documents executed and delivered by the Buyer in connection with this Agreement.

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“Buyer Indemnitees” has the meaning set forth in Paragraph 10.1, above.

“Buyer’s Bring-Down Certificate” has the meaning set forth in Paragraph 4.3(a), above.

“Capital Asset Amount” means (i) the aggregate book value of those Subject Assets constituting capital assets, plus (ii) deposits made by the Seller and included in the Subject Assets.

“Cash Purchase Price” means an amount equal to Five Million Two Hundred Fifty Thousand Dollars ($5,250,000).

“Claiming Party” has the meaning set forth in Paragraph 10.3(a), above.

“Claims Notice” has the meaning set forth in Paragraph 10.3(a), above.

“Closing” means the closing of the purchase and sale contemplated by this Agreement.

“Closing Date” has the meaning set forth in Paragraph 4.1, above.

“Code” means the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder, each as amended.

“Competitor” means any business, incorporated or otherwise, which offers or sells products anywhere in North America competitive with those offered or sold by the Subject Business during the two (2) year period immediately preceding the Closing Date or being developed by the Subject Business during the three (3) month period immediately preceding the Closing Date.

“Confidential Information” means all non-public and all proprietary information relating to the Subject Business, its customers and products, including, without limitation, each of the following: (i) all test results, specifications, know-how and all other technical information relating to the products or services of the Subject Business or any of the Subject Assets; (ii) all information and records concerning products being researched by, under development by, or being tested by the Subject Business but not yet offered for sale; (iii) all information concerning pricing policies of the Subject Business, the prices charged by the Subject Business to its customers, the volume or orders of such customers and other information concerning the transactions of the Subject Business with its customers or proposed customers; (iv) financial information concerning the Subject Business; (v) customer lists and the identity of customers of the Subject Business; (vi) information concerning the marketing programs or strategies of the Subject Business; (vii) information concerning salaries or wages paid to, the work records of and other personnel information relative to employees of the Subject Business; and (viii) all other confidential and proprietary information of the Subject Business. The term “Confidential Information” shall not include any information which: (a) at the time of disclosure is publicly available or becomes publicly available through no act or omission of the Seller or the Parent or (b) is thereafter disclosed or furnished to the Seller or the Parent by a third person which did not acquire the information under an obligation or confidentiality.

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“Consents” means agreements, from each party to an Assumed Contract which by its terms prohibits assignment by the Seller, which specifically requires consent for such assignment or under which, as a result of consummation of the transactions contemplated by this Agreement, a breach or default will occur, and from each Governmental Body promulgating a Governmental Approval held by the Seller or used in connection with the Subject Business which by its terms or applicable Law prohibits transfer by the Seller, which specifically requires consent for such transfer or under which, as a result of consummation of the transactions contemplated by this Agreement, a violation, breach or default will occur, consenting to the assignment or transfer, as the case may be, to the Buyer of such Assumed Contract or Governmental Approval under the same terms and conditions as are applicable to the Seller and without amendment or modification thereto, including without any acceleration of any provision thereof.

“Contracts” means any agreement, contract, obligation, promise or undertaking (whether oral or written) that is legally binding.

“Current Asset Amount” means the aggregate book value of those Subject Assets constituting current assets, including the Inventory, the Accounts Receivable and the Prepaids.

“Disclosure Schedule” has the meaning set forth in Paragraph 5.1, above.

“Dispute Notice” has the meaning set forth in Paragraph 2.3(a), above.

“Encumbrances” means all liens, claims, encumbrances, pledges, mortgages, restrictions on transfer and other security interests whatsoever.

“Environmental Claim” means any demand, liability, responsibility, obligation, penalty, fine, claim, Proceeding or Order arising pursuant to, or in connection with (i) an actual or alleged violation of any Environmental Law related to the operation of the business or arising out of any practices or conditions originating on or before the Closing Date, (ii) the presence, release, removal, remedial, corrective or other response action in connection with Hazardous Substances on, under or emanating to or from the Leased Real Property or the Subject Assets on or before the Closing Date, (iii) the off-site disposal of any Hazardous Substances by or on behalf of Seller or in connection with the operation of the Subject Business prior to the Closing Date; or (iv) any actual or alleged damage, injury, threat, or harm to health, safety, natural resources, wildlife or the environment.

“Environmental Law” means any Law, Governmental Approval or Order pertaining to (i) health, safety, natural resources, wildlife or the environment, (ii) the U.S. Environmental Protection Agency, the Nuclear Regulatory Commission or the Connecticut Department of Environmental Protection or any similar state agency or department, or (iii) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, release, threatened release, abatement, removal, remediation or handling of, or exposure to, any petroleum products or Hazardous Substances and all amendments, modifications and additions thereto, in each case as amended, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, codified at 42 U.S.C. 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, codified at 42 U.S.C. 6901 et seq., as amended by the Resource

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Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendment of 1984, the Toxic Substances Control Act of 1976, codified at 15 U.S.C. 2601 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, codified at 33 U.S.C. 1251 et seq., the Clean Air Act of 1966, codified at 42 U.S.C. 741 et seq., the Hazardous Materials Transportation Act, codified at 49, U.S.C. 651 et seq., the Oil Pollution Act of 1990, codified at 33 U.S.C. 2701 et seq., the Emergency Planning and Community Right-To-Know Act of 1986, codified at 42 U.S.C. 11001, et seq., the National Environmental Policy Act of 1969, codified at 42 U.S.C. 4321, et seq., the Safe Drinking Water Act of 1974, codified at 42 U.S.C. 300(f), et seq., the Atomic Energy Community Act of 1955, the Atomic Testing Liability Act, the Atomic Energy Damages Act, the Atomic Energy Omnibus Act, the Atomic/Nuclear Waste Policy Act of 1982, and the Atomic/Nuclear Waste Policy Amendments of 1987, each as amended, or any similar, implementing or successor law.

“ERISA” means the Employee Retirement Income Security Act of 1974 and the rules and regulations promulgated thereunder, each as amended.

“ERISA Affiliate” has the meaning set forth in Paragraph 5.1.20(a), above.

“Excluded Assets” has the meaning set forth in Paragraph 1.2, above.

“Excluded Liabilities” has the meaning set forth in Article III, above.

“Financial Statements” means the internally prepared financial statements of the Seller attached to the Disclosure Schedule, including, without limitation, the financial statements of the Seller as of and for the fiscal periods ended June 30, 2005, June 30, 2006 and June 30, 2007, and the unaudited interim financial statements of the Seller for the fiscal period ended March 31, 2008, each as included in the financial statements of the Parent by segment.

“GAAP” means U.S. generally accepted accounting principles.

“Governmental Approval” shall mean any permit, license, license application, product registration, variance, certificate, closure, exemption, decision, directive, action or approval of a Governmental Body.

“Governmental Body” means any (i) federal, state, local, municipal, foreign or other government, (ii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal), or (iii) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or Taxing authority or power of any nature.

“Hazardous Substances” shall mean and include any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, material, pollutant or contaminant which is hazardous, toxic or otherwise harmful to health, safety, natural resources, wildlife or the environment, including, without limitation, asbestos, polychlorinated biphenyls, radon and urea formaldehyde foam, petroleum and petroleum products, hazardous waste, and raw materials which include hazardous constituents, or any other similar substances, or materials which are now, or in the future, included or defined under or regulated by any Environmental Law.

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“Indemnifying Party” has the meaning set forth in Paragraph 10.3(a), above.

“Intellectual Property” has the meaning set forth in Paragraph 5.11(a), above.

“Inventory” has the meaning set forth in Paragraph 1.1(b), above.

“Law” means any constitution, statute, law, common law, ordinance, regulation or rule of any jurisdiction or any state, federal, foreign, territorial or other Governmental Body or subdivision, agency, department, commission, board, bureau or instrumentality of a Governmental Body.

“Leased Real Property” has the meaning set forth in Paragraph 5.1.9(a), above.

“Licenses” has the meaning set forth in Paragraph 5.1.11(b), above.

“Losses” means all direct damages, losses, deficiencies, actions, demands, judgments, fines, fees, costs and expenses actually paid by a party.

“Material Adverse Effect” means an event, condition, circumstance, act, omission or effect which, individually or in the aggregate with other similar events, conditions, circumstances, acts, omissions or effects, after taking into consideration the relative amount, the absolute amount and the nature of the item, would cause a reasonably prudent buyer to conclude that such effect adversely affects the financial condition, assets, liabilities, prospects, obligations or operations of the Seller, the Subject Business or the Subject Assets, taken as a whole, in a manner or amount which would be material.

“Notice of Reassignment” has the meaning set forth in Paragraph 6.4, above.

“Order” means any award, decision, decree, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any Governmental Body or by any arbitrator.

“Ordinary Course of Business” means any action taken by the Seller which (i) is consistent with the past practices of the Seller and is taken in the ordinary course of the normal day-to-day operations of the Seller, (ii) is not required to be authorized by the governing body of the Seller or the Parent, and (iii) is similar in nature and magnitude in actions customarily taken, without any authorization by the governing body of the Seller or the Parent, in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as the Seller.

“Parent” has the meaning set forth in the preface, above.

“Permitted Encumbrances” has the meaning set forth in Paragraph 5.1.6, above.

“Person” means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity.

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“Plan” and “Plans” have the meanings set forth in Paragraph 5.1.20(a), above.

“Prepaids” has the meaning set forth in Paragraph 1.1(e), above.

“Proceeding” means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Property Transfer Act” has the meaning set forth in Paragraph 4.2(e)(viii).

“Purchase Price” has the meaning set forth in Paragraph 2.2, above.

“Real Property Lease” means any Contract pursuant to which the Seller leases any Leased Real Property.

“Reassigned Balance” has the meaning set forth in Paragraph 6.4, above.

“Reassigned Receivables” has the meaning set forth in Paragraph 6.4, above.

“Records” has the meaning set forth in Paragraph 1.1(d), above.

“Resolving Accounting Firm” has the meaning set forth in Paragraph 2.3(a), above.

“Seller” has the meaning set forth in the preface, above.

“Seller Ancillary Documents” means, collectively, the agreements, instruments and documents executed and delivered by the Seller or the Parent in connection with this Agreement.

“Seller Indemnitees” has the meaning set forth in Paragraph 10.2, above.

“Seller’s Bring-Down Certificate” has the meaning set forth in Paragraph 4.2(a), above.

“Seller’s Knowledge” has the meaning set forth in Paragraph 5.3, above.

“Statement” has the meaning set forth in Paragraph 2.3(a), above.

“Subject Assets” has the meaning set forth in Paragraph 1.1, above.

“Subject Business” has the meaning set forth in the recitals, above.

“Subsidiaries” means, with respect to any Person, any corporation or other Person of which (or in which) fifty percent (50%) or more of (i) the outstanding capital stock or other equity interests having voting power to elect a majority of the board of directors of such corporation or Persons having a similar role as to an entity that is not a corporation, (ii) the interest in the profits of such partnership or joint venture, or (iii) the beneficial interest of such trust or estate, are, in each such instance, at directly or indirectly owned by such Person or one or more of such Person’s Subsidiaries.

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“Tax” means all federal, state, county, local, foreign and other taxes or assessments, including, without limitation, income, estimated income, business, occupation, franchise, property (real and personal), sales, employment, gross receipts, use, transfer, ad valorem, profits, license, capital, payroll, employee withholding, unemployment, excise, goods and services, severance and stamp taxes or assessments, including all interest, penalties and additions in connection therewith.

“Tax Return” means all returns, informational returns and statements required to be filed by a Person in respect of any Taxes.

“Threshold Amount” has the meaning set forth in Paragraph 10.4(a), above.

“Trade Accounts Payable Amount” means the aggregate amount of the Seller’s trade accounts payable as of the Closing Date.

“U.S.” has the meaning set forth in Paragraph 5.1.11(a), above.

ARTICLE XIII

Miscellaneous

13.1. Expenses. Except as otherwise specifically provided in this Agreement, the parties hereto shall pay their own expenses, including, without limitation, accountants’, attorneys’ and investment bankers’ fees, incurred in connection with the negotiation and consummation of the transactions contemplated by this Agreement and in no event shall any such expenses be Assumed Liabilities. In addition to fees and expenses specifically allocated to the parties in other provisions of this Agreement, the Seller and the Parent shall be jointly and severally liable for and covenant to pay and discharge when due (i) any sales, use or transfer Taxes incurred or payable in connection with the purchase and sale of the Subject Assets pursuant to this Agreement, and (ii) expenses agreed in advance that are imposed on the Seller or the Buyer related to obtaining Consents and estoppel certificates from third Persons enabling the Buyer to receive the assignment or transfer, as the case may be, of any Assumed Contracts, Governmental Approvals, or other third-party agreements related to the Subject Business or any of the Subject Assets.

13.2. Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be considered to be given and received in all respects when hand delivered, when sent by prepaid express or courier delivery service, when sent by facsimile transmission actually received by the receiving equipment, or three (3) days after being deposited in the United States mail, certified mail, postage prepaid, return receipt requested, in each case addressed as follows, or to such other address as shall be designated by notice duly given:

IF TO BUYER:	A&A Manufacturing Co., Inc.
	2300 South Calhoun Road
	New Berlin, Wisconsin 53161
	Attention:	Mr. James D. O’Rourke
	Facsimile:	(262) 796-3280

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With a Copy To:	Godfrey & Kahn, S.C.
	780 North Water Street
	Milwaukee, Wisconsin 53202
	Attention:	Mr. Charles G. Vogel
	Facsimile:	(414) 273-5198
IF TO SELLER OR PARENT:	Bolt Technology Corporation
	Four Duke Place
	Norwalk, Connecticut 06854
	Attention:	Raymond M. Soto
	Facsimile:	(203) 854-9601
With a Copy To:	Levett Rockwood P.C.
	33 Riverside Avenue
	Westport, Connecticut 06881
	Attention:	Ms. Barbara Young
	Facsimile:	(203) 226-8025

13.3. Right to Specific Performance. The parties agree that the Subject Assets and the Subject Business constitute unique property, that there is no adequate remedy at law for the damage which any of them might sustain for the failure of the others to consummate this Agreement, and, accordingly, that each of them is entitled to the remedy of specific performance to enforce such consummation.

13.4. Entire Agreement; Waiver. This Agreement, the schedules and the exhibits attached hereto and the Ancillary Documents constitute the entire agreement between the parties hereto with respect to the subject matter hereof, and all prior agreements, correspondence, discussions and understandings of the parties (whether oral or written) are merged herein and made a part hereof, it being the express intention of the parties hereto that this Agreement, the schedules and exhibits attached hereto and the Ancillary Documents shall serve as the complete and exclusive statement of the terms of their agreement together. No amendment, waiver or modification hereto or hereunder shall be valid unless in writing and signed by an authorized signatory of the party or parties to be affected thereby.

13.5. Assignment. This Agreement and the rights and obligations of each party hereunder shall not be assignable or transferable by such party without the prior written consent of each of the other parties hereto.

13.6. Binding Effect. This Agreement shall be binding upon the parties hereto and their respective heirs, personal and legal representatives, successors and permitted assigns, as applicable.

13.7. Rules of Construction.

(a) The headings in this Agreement are for purposes of convenience and ease of reference only and shall not be construed to limit or otherwise affect the meaning of any part of this Agreement.

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(b) Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, to the singular include the plural, to the part include the whole, and to the male gender shall also pertain to the female and neuter genders and vice versa.

(c) The terms “includes” and “including” are not limiting, and the term “or” has the inclusive meaning represented by the phrase “and/or”.

(d) The words “hereof”, “herein”, “hereby”, “hereto” and “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.

(e) Paragraph, Schedule, Exhibit and clause references are to this Agreement unless otherwise specified.

13.8. Severability. The parties agree that if any provision of this Agreement shall under any circumstances be deemed invalid or inoperative to any extent by any court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to render it enforceable and the rights and obligations of the parties hereunder shall be construed and enforced accordingly.

13.9. Governing Law; Jurisdiction. This Agreement and all questions arising in connection herewith shall be governed by and construed in accordance with the internal laws of the State of Connecticut, without regard to any conflicts of law principles. Any dispute, claim or controversy relating to or arising under this Agreement or the dealings of the parties which cannot be resolved amicably by the parties shall be commenced and prosecuted exclusively in the state or federal courts located in New Haven, Connecticut, and each party hereto consents to the exercise of personal jurisdiction over such party by such state and federal courts.

13.10. Counterparts; Facsimile Signatures. This Agreement may be executed in one or more counterparts and by facsimile, all of which shall be considered but one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party.

13.11. Passage of Title. Legal title and equitable title with respect to the Subject Assets shall not pass to the Buyer until the Subject Assets are transferred at the Closing, which transfer, once it has occurred, will be deemed effective for tax, accounting and other computational purposes as of 11:59 p.m. (Connecticut time) on the Closing Date.

[Signatures follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day, month and year first above written.

SELLER:
CUSTOM PRODUCTS CORPORATION
By:	/S/ RAYMOND M. SOTO
Print Name:	Raymond M. Soto
Title:	Chairman
PARENT:
BOLT TECHNOLOGY CORPORATION
By:	/S/ RAYMOND M. SOTO
Print Name:	Raymond M. Soto
Title:	Chairman, Chief Executive Officer and President
BUYER:
A & A MANUFACTURING CO., INC.
By:	/S/ JAMES D. O’ROURKE
Print Name:	James D. O’Rourke
Title:	President

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EX-21

EXHIBIT 21

SUBSIDIARIES

The following are subsidiaries of the Registrant, Bolt Technology Corporation, a Connecticut corporation:

	State of Incorporation
A-G Geophysical Products, Inc.	Texas
CPC2008, Inc.*	Connecticut
Real Time Systems Inc.	Connecticut

* Formerly Custom Products Corporation.

The names of certain subsidiaries are omitted since such subsidiaries considered in the aggregate would not constitute a significant subsidiary at the end of the year covered by this report.

EX-23

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement No. 333-140854 on Form S-8 of Bolt Technology Corporation (the “Company”), as amended by Post-Effective Amendment No. 1, of our reports dated September 10, 2008 relating to our audits of the consolidated financial statements and the financial statement schedule and internal control over financial reporting, which appear in this Annual Report on Form 10-K of Bolt Technology Corporation for the year ended June 30, 2008.

/s/ McGladrey & Pullen, LLP

Stamford, Connecticut

September 10, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Raymond M. Soto, certify that:

1. I have reviewed this annual report on Form 10-K of Bolt Technology Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 12, 2008

/s/    RAYMOND M. SOTO        

Raymond M. Soto

Chairman of the Board, President and

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Joseph Espeso, certify that:

1. I have reviewed this annual report on Form 10-K of Bolt Technology Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 12, 2008

/s/    JOSEPH ESPESO        

Joseph Espeso

Senior Vice President—Finance

and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bolt Technology Corporation (the “Company”) on Form 10-K for the fiscal year ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond M. Soto, Chairman of the Board, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 12, 2008

/s/    RAYMOND M. SOTO        

Raymond M. Soto

Chairman of the Board, President and

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bolt Technology Corporation (the “Company”) on Form 10-K for the fiscal year ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph Espeso, Senior Vice President-Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 12, 2008

/s/    JOSEPH ESPESO        

Joseph Espeso

Senior Vice President—Finance and

Chief Financial Officer

CORRESP

Securities and Exchange Commission letter